Exam 10: Externalities and Property Rights

Since the cost of obtaining more of any resource is __________,viewing any resource's price as zero leads to __________.

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 occupants 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. Refer to the information given above.The Coase Theorem would predict that if the property right to smoke belongs to the cigar smoker,then there ________ smoking in the room.If the property right to clean indoor air belongs to the room occupants,then there ________ smoking in the room.

Suppose that the EPA has proposed strict controls on the amount of sulfur that diesel fuel contains.These controls were designed to fully offset the cost of pollution generated by diesel fuel vehicles.The effect of the regulation is estimated to increase the equilibrium price of a gallon of diesel fuel by 10 cents. Refer to the information given above.Assuming that the supply of diesel fuel has a positive slope and demand has a negative slope,one can infer that the EPA determined that:

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.Suppose a village elder decides the total number of goats and bonds with the goal of maximizing total village income.The village income will be _______.

If being labeled a nerd (someone who studies a lot and has high grades)in high school or college is a social negative then,according to the textbook:

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 occupants 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. Refer to the information given above.If the rules governing the room instead stated that smoking is allowed unless everyone in the room agrees to prohibit it:

According to the textbook,social norms can be viewed as: