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

Table 9.8 -Table 9.8 shows the production cost for two utilities at different levels of sulfur dioxide emissions. Assume that the government issued 8 marketable pollution permits to each firm. If the two firms were to voluntarily trade pollution permits, how many permits would be swapped?

Public Broadcasting reads the names of local contributors on the air. This is likely to ________ the free-rider problem and lead to a ________ level of contribution to the public good.

Adverse selection in employment is more likely when

If a local government gives out water filters to low-income families free of charge, they are

If a typical consumer is willing to pay $3,000 for a plum and $1,000 for a lemon, and there is a 50% chance of getting a lemon, the typical consumer is willing to pay $2,000 for a used car.

Why can car insurance companies charge higher auto rates for new customers than for established customers, all else held constant?

Lemon laws that allow consumers to return low-quality used cars are designed to help solve the problem of ________ in used car markets.

Suppose Johnson's Rubber Factory belches black smoke into the air over the city of Bellowsville. If the city of Bellowsville attempts to internalize the external costs associated with the production of rubber with a pollution tax, then we expect

In some markets for used goods

A public good is a good that

The adverse selection problem suggests that

Under a Coase bargaining solution, deal making between the two parties continues until the marginal ________ to the harmed party equals the marginal ________ to the other party.

Suppose a health insurance company notes that almost all of its customers are at a high risk of illness or injury. This is an example of

Suppose buyers in the used car market are willing to pay $3,500 for a plum (high-quality) used car and $1,500 for a lemon (low-quality) used car. If buyers believe that 30% of the used cars on the market are lemons (low quality), what would they be willing to pay for a used car?

Figure 9.1 -Figure 9.1 represents the market for used bikes. Suppose buyers are willing to pay $200 for a plum (high-quality) used bike and $50 for a lemon (low-quality) used bike. If buyers believe that 50% of used bikes in the market are lemons (low quality), what fraction of used bikes sold will actually be lemons (low quality)?

What is the economic rule for the optimal amount of pollution?

Table 9.3 -In Table 9.3, Market 2 would be in equilibrium if buyers believed plums account for

Suppose that a state installs a toll booth on a highway and requires drivers to pay $1.00 before entering the highway. Installation of the toll booth changes

An example of a good that is nonrival in consumption is

One assumption of the basic model of supply and demand is that