Exam 18: Externalities, Open-Access, and Public Goods

-The above figure shows the marginal benefit from pollution for two firms.If each firm receives a marketable permit to produce 25 units of pollution,which one of the following is most likely to happen?

A firm operates and produces pollution that only harms an individual,Bob.The firm and Bob both know the costs and benefits of reducing pollution.Neither the firm nor Bob acts strategically while bargaining,and there are no transaction costs associated with bargaining.Explain how the efficient level of pollution occurs no matter whether the firm or Bob owns the property right to pollution.

When majority rule voting is used to determine whether to purchase a public good,

In a competitive market,a negative externality creates a deadweight loss because

Suppose 100 citizens each derive marginal benefit from submarines according to the function MB = 10 - Q.If subs cost $100 each to produce,what is the efficient quantity of submarines?

-The above figure shows the marginal benefit to a firm of polluting in the local river while producing its output,and the marginal cost to the surrounding neighbors.The marginal cost of production is zero for the firm.If the firm owns the river and there are thousands of surrounding neighbors,how much pollution is likely to occur?

-The above figure shows the market for steel ingots.If the market is competitive,then to achieve the socially optimal level of pollution,the government can

-The above figure shows the market for steel ingots.If the market is competitive,then the deadweight loss to society is

Because a monopoly will produce less of a good than a competitive market will,welfare is always greater under monopoly than under competition in the presence of a negative externality.

-The above figure shows the payoff matrix for two firms.A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake.A private beach on the lake must decide whether to operate or not.Increased pollution reduces the number of people who wish to visit the beach.If nobody owns the lake,then

-The above figure shows the payoff matrix for two firms.A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake.A private beach on the lake must decide whether to operate or not.Increased pollution reduces the number of people who wish to visit the beach.Joint profits are maximized when

Changing the price of a good will usually result in a negative externality.

In the presence of a negative externality,a specific tax can achieve the social optimum because

-The above figure shows the payoff matrix for two firms.A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake.A private beach on the lake must decide whether to operate or not.Increased pollution reduces the number of people who wish to visit the beach.If the beach owner also owns the lake,and the chemical firm must pay $10 per ton to pollute,then

To maximize welfare in a competitive market that has a negative externality in production,government should tax a pollution-generating good at a specific tax equal to the marginal cost of producing the good.

The price of pie increases.Some people who purchased pie before the price increase no longer purchase pie.This is

The Commons Problem could be addressed by

Consider a housing development built near an existing airport.After the houses are occupied,homeowners complain that the airport imposes a negative externality on them and it should be moved or otherwise limited.Is the airport a negative externality?

Suppose two neighbors share a park.One neighbor,Al,leaves trash in the park.This bothers the other neighbor,Bert.According to Coase's Theorem,the optimal level of trash in the park can be achieved if

-Suppose that the market for steel is shown in the above figure.What specific tax would result in a competitive market producing the socially optimal quantity of steel?