Exam 10: Externalities and Property Rights

Brady owns a beachfront lot with a small house.During hurricanes,he refuses to leave.Afterward he applies for federal assistance to rebuild and files insurance claims for damages.By doing so,Brady is:

In the case of either a positive or negative externality,it will always be true that,relative to the social optimum:

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

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 in the diagram reflects private benefits and the other reflects social benefits. Refer to the figure above.The socially optimal number of vaccines is _______.

A positional externality:

Which of the following would be most vulnerable to the tragedy of the commons?

Suppose Erie Textiles can dispose of its waste "for free" by dumping it into a nearby river.While the firm benefits from dumping waste into the river,the waste reduces the fish and bird reproduction.This causes damage to local fishermen and bird watchers.At a cost,Erie Textiles can filter out the toxins,in which case local fishermen and bird watchers will not suffer any damage.The relevant gains (in thousands of dollars)and losses for the three parties are listed below. With Filter Without Gains to Erie \ 200 \ 400 Fishermen \ 180 \ 50 Bird Watchers \ 130 \ 25 Refer to the information given above.When Erie Textiles operates without a filter,the total daily gain (in thousands of dollars)by all three parties is _______.

A village has five residents,each of whom has accumulated savings of $50.Each villager can use the money to buy a government bond that pays 10% interest per year or to buy a year-old goat,send it onto the commons to graze,and sell it after one year.The price of the goat that the villager will get at the end of the year depends on the amount of weight it gains while grazing on the commons,which in turn depends on the number of goats sent onto the commons,as shown in table below. $\begin{array} { c c c } \begin{array} { c } \text { Number of goats } \\\text { on the commons }\end{array} & \begin{array} { c } \text { Price per 2-year-old } \\\text { goat (\$) }\end{array} & \begin{array} { c } \text { Income per goat } \\\text { (\$/year) }\end{array} \\1 & 80 & 30 \\2 & 75 & 25 \\3 & 70 & 20 \\4 & 65 & 15 \\5 & 55 & 5\end{array}$ Refer to the information given above.Left to private incentives,the villagers earn _____ than when goat grazing is determined collectively.

Which of the following is most likely to be used efficiently?

Lunch in Jamie's dorm is an all-you-can-eat buffet,served from 11 a.m.until 1 p.m.By noon,the buffet is picked over,and by 12:30,there are very few popular items left.The garbage bins,though,are full of food. Refer to the information given above.If the cafeteria changed its policy so that students had to pay for each item chosen,students would:

Early settlers in the town of Dry Gulch drilled wells to pump as much water as they wanted from the single aquifer beneath the town.(An aquifer is an underground body of water. )As more people settled in Dry Gulch,the aquifer level fell and new wells had to be drilled deeper at higher cost. Refer to the information given above.Compared to a town in which all residents collectively decide on how much water to use,Dry Gulch will experience:

When part of the cost of an activity falls on people not pursuing the activity,it is call a(n):

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

A resource that has common property rights is one that:

In order to achieve a socially optimal level of output,production that generates positive externalities should be:

When some fraction of the benefit of an activity is received by people not participating in the activity,it is called a(n):

A property-rights solution to the problem of the poaching of elephants for their ivory would be to:

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 in the diagram reflects private benefits and the other reflects social benefits. Refer to the figure above.This externality could most effectively be corrected by:

The presence of an external benefit that is not corrected results in:

Suppose that in most car collisions between cars of unequal size,the smaller car sustains the most damage and its occupants suffer the most injury.In answering the following question,assume that,on average,smaller cars generate less air pollution and that every person in the economy drives at least one car. Refer to the information above.Individuals have a private incentive to: