Exam 10: Externalities and Public Goods

(Figure: Public Goods and Common Resources) Use Figure: Public Goods and Common Resources. The figure lists the goods available for consumption. Panel A depicts a good that is both rival in consumption and excludable. Such a good would be considered a:

The marginal private benefit is the:

Most neighborhood streets have traffic lights to help control the flow of traffic. Traffic lights are _____ and _____. Therefore, they will be _____ by the competitive market.

Marginal private cost plus marginal external cost equals _____ cost.

Police protection is provided in most, if not all, urban and rural localities. However, individuals also purchase protective devices, such as alarm systems, to protect themselves. For most citizens, police protection is a _____ good, while self-protection devices are a _____ good.

The marginal social benefit received from pollution is equal to its marginal social cost in the market for highly polished ceramic. In this situation:

Which statement best exemplifies a negative externality?

If left to the private market, the provision of a public good would be _____ than it is now, and free riders would pay _____ to consume it.

Which activity generates a positive externality?

The measles vaccine provides both private benefits to individuals and positive external benefits to other members of society. In equilibrium:

Each of these is an example of an external cost EXCEPT:

The proposition that, if bargaining costs are low enough, the private market can achieve an efficient outcome, regardless of which of the affected parties hold the property rights, is known as the:

A marginal external benefit is the:

Which is a public good?

(Figure: Market 8) Use the graph to answer the question. The graph shows the marginal social cost, marginal private cost, and demand curves in the aux cable market. If the government uses a quota to control an externality in this market, what quantity would be chosen as a limit on sales?

If the marginal social benefit received from pollution is greater than its marginal social cost in a market:

If the number of available cap and trade permits is decreased, the equilibrium price of the permits _____, and the equilibrium quantity of emissions _____.

Using rules or regulations as a method to control an externality is often described as a blunt instrument. What aspects and implications of using rules and regulations to control an externality give it the "blunt instrument" description?

Which of the following is NOT an example of a corrective tax or subsidy used to address an externality problem?

When someone can enjoy the benefits of a good without bearing the cost, the good: