Exam 9: Externalities and Public Goods

The Coase Theorem relies on internalizing externalities through ________.

The citizens of a country often refuse to pay voluntarily for national defense because ________.

The drainage of chemical fertilizers used on agricultural plots along the banks of the Blue River has led to the formation of a dead zone in the river that cannot support aquatic life.Without any government intervention,will the market for fertilizers produce a socially optimal quantity? Why or why not? Explain your answer with the help of suitable diagrams.

Which of the following results in a positive externality?

The following figure shows the market supply and demand of a good whose production entails a $2 negative externality per unit. -Refer to the figure above.The socially optimal quantity of this good should be ________ units.

Suppose your roommate approaches you and asks if you would like to split the cable bill for your apartment.You decline,citing that you are not home often and are more likely to stream content on your laptop.Your roommate purchases a deluxe cable package,and you frequently watch programs on the television in your apartment.This is an example of a ________.

Scenario: Suppose there are only three houses on a street. The following table shows each homeowner's willingness to pay for street lights. It costs $700 to install a street light. -Refer to the scenario above.The socially optimal number of street lights for this street is ________.

An externality occurs when ________.

The following figure shows the market supply and demand of a good whose production entails a $2 negative externality per unit. -Refer to the figure above.The socially optimal price for this good should be ________.

Which of the following is most likely to give rise to a positive externality?

A law stating that power plants are allowed zero emissions of sulfur dioxide is an example of ________.

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. Suppose that there are 140 houses that are vacant and the town council makes it illegal to use plywood to board them up, leaving only polycarbonate panels as an alternative. 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.What would be the price of a polycarbonate panel after the ban on plywood?

What is the difference between club goods and common pool resource goods? Give one example of each type of good.

To derive the market demand for a public good,________.

Which of the following occurs if the production of a good gives rise to positive externalities?

Alex is a non-union employee in a steel factory in the southern district of Berylia.The union workers of the factory are able to negotiate certain benefits for the employees.Alex enjoys all the benefits,even though he does not pay the union fee.This is an example of ________ behavior.

Which of the following is a market-based alternative to the Kansas state government's approach to reduce earthquakes as described in the textbook?

Which of the following is an example of a public good?

What does the Coase Theorem predict?

Which of the following activities is most likely to give rise to a positive externality?