Exam 9: Imperfect Information, External Benefits, and External Costs

Global warming has become a major international environmental issue. Using the concept of externality, explain why countries around the world seldom reach an agreement to reduce the use of fossil fuels.

An example of a good that is rival in consumption is

When the government provides a public good by taxing citizens and using tax money to provide the good

A carbon tax on fossil fuels is likely to cause the price of goods produced by firms that use fossil fuels to

Describe the market effects of a carbon tax.

Why do used goods of different qualities often sell for the same price, while used goods of different sizes sell for different prices?

If the marginal benefit from water pollution abatement increases, then it is efficient to

The Coase bargaining solution applies to a situation when there is a ________ number of affected parties, and the transactions costs of bargaining are relatively ________.

In a thin market

CARFAX is a company that compiles and sells histories of used cars. CARFAX reduces the

Coase bargaining works best in a situation with a large number of affected parties and the transactions costs of bargaining are relatively low.

If the seller knows more about the good than the buyer knows there exists

Suppose that buyers assume that there is a 30% chance of getting a plum, and 8 of 10 cars in the used car market are lemons. Is this an equilibrium?

Which of the following is likely to overcome the free-rider problem?

A charity that used to arrange matching charitable contributions, but no longer does, is likely to ________ the free-rider problem and lead to a ________ level of contribution to the public good.

Recall the Application about how to wash carbon out of the air to answer the following question(s). -This Application deals with the problem of ________ emissions in the atmosphere.

To be an example of a public good, a good must be both rival in consumption and nonexcludable.

Table 9.4 -Table 9.4 represents 3 markets for used motorcycles. Which of the markets in Table 9.4 are in equilibrium?

A good is nonexcludable in consumption if it is not practical to exclude people who don't pay for it from enjoying its benefits.

Table 9.1 -Refer to Table 9.1. In which market do buyers underestimate the chance of getting a lemon?