Exam 5: Externalities, Environmental Policy, and Public Goods

Which of the following is an example of a product that is nonexcludable and rival?

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the marginal external cost of the acid rain, the government's action would

What is an externality?

Haiti was once a heavily forested country.Today, 80 percent of Haiti's forests have been cut down, primarily to be burned to create charcoal.The reduction in the number of trees has lead to devastating floods when it rains heavily.This is an example of

What is a private benefit from consumption? What is a social benefit from consumption? When is the private benefit from consumption equal to the social benefit from consumption?

A public good is

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to the Article Summary above.Assuming the findings are correct and all else equal, people who do not shop at Trader Joe's can still benefit from living near the store, as is shown by the higher home values.As a result, the marginal social benefit from living near a Trader Joe's is ________ the marginal private benefit to those who shop at Trader Joe's.

Sefronia and Bella share an apartment and they are deciding whether or not to purchase a weekly housecleaning service.The value of the service to each of them is $50 and it costs $80 to hire a housecleaner.Should they hire a housecleaner?

Figure 5-11 Coal burning utilities release sulfur dioxide and nitric acid which react with water to produce acid rain.Acid rain damages trees and crops and kills fish.Because the utilities do not bear the cost of the acid rain, they overproduce the quantity of electricity.This is illustrated in Figure 5-11. -Refer to Figure 5-11.S₁ represents the supply curve that reflects the private cost of production and S₂ represents the supply curve that reflects the social cost of production.One way to internalize the external cost generated by utilities is to impose a Pigovian tax on the production of electricity.What is the size of the Pigovian tax that will internalize the cost of the externality?

When negative externalities exist, the competitive market supply curve does not include all of the costs borne by members of society.

In economics, the term "free rider" refers to

If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set

Figure 5-10 Chicken pox vaccinations for toddlers benefit society by protecting young children and by preventing an epidemic of the disease.Thus, the social benefits of chicken pox vaccinations exceed the private benefit for any quantity of vaccinations as illustrated in Figure 5-10. -Refer to Figure 5-10.What is the value of the net gain to society as a result of subsidizing chicken pox vaccinations?

Who was the economist who first proposed that governments use taxes and subsidies to correct for externalities?

Figure 5-3 -Refer to Figure 5-3.The efficient output level is

Figure 5-16 Amit and Bree are the only two homeowners on an isolated private road.Both agree that installing street lights along the road would be beneficial and want to do so.Figure 5-16 shows their willingness to pay for different quantities of street lights, the market demand for street lights, and the marginal cost of installing the street lights. -Refer to Figure 5-16.How much is Amit willing to pay per street light to have 4 street lights installed?

An externality is an example of a market failure.

One problem with using a command-and-control approach to pollution reduction is that the monitoring costs may be too high.

The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.

Figure 5-13 Figure 5-13 illustrates the market for gasoline before and after the government imposes a tax to bring about the efficient level of gasoline production. -Refer to Figure 5-13.The gasoline tax raises the price paid by consumers by ________ per gallon.