Exam 10: Externalities and Property Rights

Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. One of the demand curves below represents the private demand for the vaccine and the other represents the social demand for the vaccine. The socially optimal quantity of the vaccine is ______ doses per day.

Which one of the following government actions is intended to generate positive externalities?

According to the textbook, if students are graded on a curve so that each student's grade depends upon their performance relative to other students, the resulting positional arms race are partially offset by social norms that:

In the case of either a positive or negative externality, a good's market price will:

Suppose there are ten people playing cards in a room. One of them wants to smoke a cigar; nine of them dislike the smell of cigar smoke. The smoker values the privilege of smoking at $5, and each of the other nine people of the room would be willing to pay fifty cents for clean air in the room. The rules governing use of the room state that smoking is not allowed unless everyone agrees to allow smoking. If the rules governing the room instead stated that smoking is allowed unless everyone in the room agrees to prohibit it, then:

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. Quick Burger Operates a Drive-Through Window Quick Burger Does Not Operate Drive-Through Window Quick Burger \ 24,000 \ 15,000 The Sunshine Caf \ 11,000 \ 23,000 If Quick Burger has the legal right to operate a drive-through window, then the Sunshine Café would be willing to pay Quick Burger as much as ______ per month to NOT operate a drive-through window.

Shel and Fran are neighbors. They work at the same firm and hold the same title. Shel finds that when Fran's consumption rises, Shel feels worse off. Fran feels the same way about Shel's consumption. Suppose the firm that employs both Fran and Shel begins to offer one hour of overtime at 1.5 times their base hourly wage. It is likely that:

The optimal quantity of a negative externality is zero if:

The following data show the relationship between the number of drivers who leave for work at 8:00 a.m., their average commute time, and their marginal benefit of commuting. Number of Drivers Who Leave at 8 am Average Commute Time Marginal Benefit 100 30 minutes \ 10 200 65 minutes \ 8 300 110 minutes \ 4 400 170 minutes \ 3 500 260 minutes \ 1 If commuters view highway use as having a price of zero, then one can predict that ______ drivers will leave for downtown at 8:00 am.

Suppose there are ten people playing cards in a room. One of them wants to smoke a cigar; nine of them dislike the smell of cigar smoke. The smoker values the privilege of smoking at $5, and each of the other nine people of the room would be willing to pay fifty cents for clean air in the room. The rules governing use of the room state that smoking is not allowed unless everyone agrees to allow smoking. Is it socially optimal for the cigar smoker to smoke?

Consider two restaurants located next door to each other: Quick Burger and The Sunshine Café. If Quick Burger opens a drive-through window, the increased traffic and noise will bother customers seated outside at The Sunshine Café. The table below shows the monthly payoffs to Quick Burger and The Sunshine Café when Quick Burger does and does not operate a drive-through window. Quick Burger Operates a Drive-Through Window Quick Burger Does Not Operate Drive-Through Window Quick Burger \ 24,000 \ 15,000 The Sunshine Caf \ 11,000 \ 23,000 If Quick Burger has the legal right to operate a drive-through, and Quick Burger and The Sunshine Café CANNOT negotiate with each other, then will Quick Burger operate a drive-though window?

Which of the following investments is part of a positional arms race?

Refer to the figure below. This graph suggests that the private market provides incentives to:

This graph shows the marginal cost and marginal benefit associated with roadside litter clean up. Assume that the marginal benefit curve and marginal cost curve each have their usual slope. Suppose the state highway department has picked up 15 bags of litter. Protesters have staged a demonstration demanding that the highway department return to pick up the remaining litter. From an economic efficiency perspective, the protesters have a ______ claim because ______.

When one's performance is judged relative to others' performance and not by an absolute standard:

Refer to the figure below. This graph describes a good that:

Suppose there are ten people playing cards in a room. One of them wants to smoke a cigar; nine of them dislike the smell of cigar smoke. The smoker values the privilege of smoking at $5, and each of the other nine people of the room would be willing to pay fifty cents for clean air in the room. The rules governing use of the room state that smoking is not allowed unless everyone agrees to allow smoking. If the cigar smoker paid each other occupant fifty cents for the right to smoke, the cigar smoker would be ______ and the other occupants would be _______.

Kate and Ali can live together a two-bedroom apartment for $600 per month, or they can each rent a one-bedroom apartment for $400 per month. Apart from the rent, they are indifferent between living together and living apart, except for one problem: Kate hates Ali's taste in music. Kate would be willing to pay up to $100 a month to avoid hearing Ali's music. Ali would give up listening to her music for no less than $300 per month. If Kate and Ali decide to live together, is it socially optimal for Ali play her music in the apartment?

Which of the following is an example of a positional arms control agreement?

Curly and Moe are considering living alone or being roommates and splitting the rent for the next twelve months. If they live alone, they each rent a one bedroom, one bath apartment for $500 per month, while if they are roommates, they can split a two bedroom, one bath apartment for $800 per month. The one difficulty they have is that Moe snores very loudly. Curly estimates the cost of poor sleep due to Moe's snoring at $150 per month. Moe could obtain a snore-eliminating device for $50 per month. The actual monthly gain in surplus to Curly and Moe from living together after addressing the snoring problems in the least costly way is: