Exam 10: Externalities and Property Rights

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.As the average size of cars increases,the incentive to buy a smaller car:

For most people,baking cinnamon rolls generates _____ externality,and burning tires generates _______ externality.

If the marginal cost of reducing pollution is positive:

This graph shows the marginal costs and marginal benefits associated with roadside litter clean up.Assume that the marginal cost and marginal benefit curves slope in the usual directions. Refer to the information given above.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 ________.

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.Suppose that Erie Textiles can only negotiate with one of the affected groups.Will Erie operate with a filter?

If an activity generates a positive externality,the government can make provision of that activity more efficient by _____,and if an activity generates a negative externality,the government can make provision of that activity more efficient by _____.

This graph shows the marginal costs and marginal benefits associated with roadside litter clean up.Assume that the marginal cost and marginal benefit curves slope in the usual directions. Refer to the information given above.Picking up the 20^th bag of litter would:

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.What will be the total village income,if every individual makes the decision that gives him or her the most private benefit?

If the market equilibrium quantity is greater than the socially optimal quantity,one can infer that:

If coal mining produces a negative externality in the form of polluted streams then,at the market equilibrium,the:

This graph shows the marginal costs and marginal benefits associated with roadside litter clean up.Assume that the marginal cost and marginal benefit curves slope in the usual directions. Refer to the information given above.The marginal cost of removing litter _______ due to the principle of ____________.

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.The daily cost (in thousands of dollars)of the filter to Erie Textiles is _______,and the daily net benefit (in thousands of dollars)of the filter to the fishermen and bird watchers is _______.

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. Refer to the information given above.Curly and Moe have both taken an economics course and so are willing to apply the Coase Theorem and negotiate.Who will compensate the other?

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.If Erie Textiles does not install the filter,there will be a net social _____ of _____ (in thousands of dollars).

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 towards Shel's consumption. Refer to the information given above.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:

An external benefit implies that private markets will provide ____ of the good (relative to the social optimum),and an external cost implies that private markets will provide _____ of the good.

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.The reason there is _____ waste with an all-you-can-eat buffet than with a price-per-item cafeteria is that:

In the United States,private property rights are:

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.If the flu vaccine is provided by private markets,deadweight loss will be _______.

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.If all three parties can communicate and negotiate with each other at no cost,will Erie Textiles use a filter?