Exam 5: Externalities, Environmental Policy, and Public Goods

Congress passed the Clean Air Act in 1970.Since this act was passed, emissions of the six main air pollutants

A private good is

Economist A.C.Pigou argued that to deal with a negative externality in production, the government should impose a tax equal to the cost of the externality.What did Pigou believe should be done in the case of a positive externality in consumption? How would his recommendation impact the demand and market equilibrium for the product which is generating the positive externality?

Alternative approaches for reducing carbon dioxide emissions are

The demand curve for a public good is also called the

Figure 5-6 Figure 5-6 shows the market for measles vaccinations, a product whose use generates positive externalities. -Refer to Figure 5-6.What is the market equilibrium output level?

Which of the following describes a positive externality?

When a tax on output is imposed to internalize the external costs of pollution, the supply curve shifts down by the amount of the tax.

The social cost of cutting trees for firewood in a government forest is

The "tragedy of the commons" refers to the phenomenon where

Which of the following must be present to reach a private solution to an externality problem?

If the marginal social benefit of consuming a good or a service exceeds the marginal private benefit

When production generates a negative externality, the true cost of production is the

"When it comes to public goods, individuals do not reveal their true preferences because it is not in their self interest to do so." Evaluate this statement.

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.Suppose Amit and Bree know each other's preferences so that it is not possible for one to deceive the other.Which of the following statements best describes the circumstances under which the optimal quantity of street lights could be achieved?

An advantage of imposing a tax on the producer that generates pollution is that

Figure 5-2 Figure 5-2 shows a market with a negative externality. -Refer to Figure 5-2.The private profit-maximizing quantity for the firm is

Figure 5-3 -Refer to Figure 5-3.The deadweight loss due to the externality is represented by the area

Economists Kenneth Chay and Michael Greenstone found that in the two years following the passage of the Clean Air Act of 1970, the sharp reduction in air pollution also led to a decline in infant deaths.Although this and other studies provide compelling evidence of the link between pollution and infant health, it is not clear that reductions from the much lower levels of ambient pollution today would have the same effect.Which of the following reasons could explain this?

The U.S.government has frequently used a "command-and-control" approach in dealing with pollution.Which of the following describes this approach?