Exam 9: Externalities and Public Goods

Scenario: Ron plays loud music, which prevents his neighbor from studying. He knows that his neighbor values studying at $5,000, while the cost of soundproofing Ron's room is $3,000. -Refer to the scenario above.Which of the following problems is likely to occur?

Scenario: Vacant houses, foreclosed or abandoned, are typically boarded up with plywood that many people consider unsightly and likely to invite vandalism. An alternative is clear plastic (polycarbonate) panels. The figure below shows the demand and the supply of polycarbonate panels used for boarding up houses in a hypothetical town. To answer some of the questions below, it will be useful to find the equations of the three lines in the figure. -Refer to the scenario above.Use of polycarbonate panels to board up vacant houses has a ________.

Scenario: Jim and Jane are the only residents of an apartment building. The figures below show their demand curves for security guards (in hours of duty per day) who staff the entrance to the apartment. To answer some of the questions below, it will be useful to find the equations of the two lines in the figure. -Refer to the figure above.What is the maximum amount of money Jim and Jane together would pay to have 15 hours of security guards' presence?

Four friends decide to have a party every Saturday.They decide to pool the money to spend on the parties.The table below shows the maximum amount each friend is willing to contribute to each party. If the cost of each party is $225,how many parties should they have to maximize total surplus?

Your roommate claims we can understand the near-extinction of the American bison during the latter half of the nineteenth century in America as an economic phenomenon.Since bison herds were ________ "owned," they were a ________,and buffalo hunters generated a ________ externality when hunting them,as the hunters failed to consider how overharvesting could reduce herd numbers in the future.

Which of the following is necessary for markets to operate efficiently?

Which of the following goods is rival in consumption and is also excludable?

A chemical factory releases its by-products into a nearby river,which harms aquatic flora and fauna.This is an example of a ________.

A positive externality ________.

A vaccination against a disease helps prevent the spread of the disease.Which of the following can help increase the number of people vaccinated to the socially optimal level?

If negative externalities are present in a market,________.

Scenario: A chemical factory is located upstream on a river. The factory dumps its liquid waste into the river. A microbrewery is located downstream on this river; it uses the river water in its production process and values the clean water. The chemical factory can filter its liquid waste before dumping it into the river, but it would be costly to the factory. The table below shows the profit to these two businesses under different circumstances. -Refer to scenario above.Suppose the negotiation between the chemical factory and microbrewery is costless.What is the minimum offer that the chemical factory would be willing to accept from the microbrewery to to filter its waste?

What are pecuniary externalities? Explain with the help of an example.

In episode 12 of the sixth season of The Sopranos,A.J.is watching television with his girlfriend Bianca at her apartment when a group of neighborhood youths begins playing music at a very loud level outside.A.J.approaches the youths and offers them his new mountain bike if they will stop playing the music and leave.The group of youths accepts the mountain bike and leaves.This scene is an example of ________.

Which of the following is not true regarding externalities?

If the production of a good involves positive externalities,________.

Which of the following is a reason that the Coase Theorem does not work in practice?

What is a Pigouvian tax?

A steel-producing factory in North Palladia generates large amounts of carbon dioxide during its production process.A per-unit tax on the production of steel that equals the marginal ________ of steel production will entirely internalize the externality.

The presence of external benefits associated with production implies that ________.