Exam 10: Externalities and Public Goods

A paper manufacturing plant dumps pollution into the Salmon Arm. This pollution leads to higher costs and disruption for fishermen on the river, for which they are not compensated. In this situation:

One of the main problems with the Coase theorem is that:

Marginal private cost is the:

Margarite opened a successful restaurant two years ago on a block of connecting row houses. All of the other businesses on the block are well-established accounting and law offices. Those businesses have complained that the garbage bins in back of the restaurant are attracting mice, rats, and stray cats and dogs and that they are spending more and more on exterminators. In economic terms, what is happening?

An external cost is:

By contrast with a market that produces the socially optimal output, a market with negative externalities will:

The notion that even in the presence of externalities, an economy can reach an efficient solution as long as the bargaining costs of making a deal are low is known as:

What is meant by the statement "There is a socially optimal amount of water pollution that is not zero"?

A nonrival good is a good:

Which step is omitted from the three-step recipe used to analyze externalities in Table 2? (Note: The steps are not necessarily in order.) Table 2: Steps in the Three-Step Recipe to Analyze Externalities Assess the externalities. Predict the equilibrium outcome.

An online movie download is similar to a Blu-ray disc movie in that it is _____, but it is also similar to national defense in that it is _____.

Which of the following is NOT part of the three-step recipe used to analyze externalities? (Note: the steps are not necessarily in order.)

What step is omitted from the three-step recipe used to analyze externalities in Table 1? Table 1: Steps in the Three-Step Recipe to Analyze Externalities Assess the externalities. Find the socially optimal outcome.

A tax designed to induce people to take account of the negative externalities that they cause is referred to as _____ tax.

Junko's car dealership has been suffering from dust on the cars in its lot ever since Mak opened his bakery nearby. The bakery's flour deliveries send waves of dust down the block. Junko offers to cover half of the cost of Mak adding a shelter for his delivery area to reduce the blowing of flour dust toward the dealership. This is an example of reducing a negative externality through:

Which of the following describes a situation with a negative externality?

The production of a particular good generates a negative externality. To reduce the amount of this externality, the government sets a limit on the quantity of the product that can be produced. This type of action shows the government ______ to deal with the externality.

Which statement does NOT generate a negative externality?

_____ tax is designed to encourage people to take responsibility for the negative externalities they cause.

A private good, such as a book, _____ excludable and is _____ in consumption.