Exam 15: Externalities , Environmental Policy and Public Goods

Suppose a negative externality exists in a market. If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem,

-Refer to Figure 15-7. Which of the following statements is true?

What is a 'social cost' of production?

-Refer to Figure 15-10. What is the value of the net gain to society as a result of subsidising chicken pox vaccinations?

What is meant by the term 'internalising an externality'? How does a Pigovian tax or subsidy internalise an externality?

Which of the following describes how a positive externality affects a competitive market?

According to ________, in a market with an externality, private parties would voluntarily negotiate an efficient outcome without government intervention.

Assume that production from an electric utility caused acid rain. If the government imposed a tax on the utility equal to the cost of the acid rain, the government's action would

Issuing marketable emission allowance permits to polluting firms will result in those firms polluting more than is socially desirable.

One difference between the demand for a private good and that for a public good is that

Which of the following best illustrates the free rider problem?

The social benefit of a given level of a public good is the vertical sum of all private benefits for that level.

Which of the following activities creates a negative externality?

What are transactions costs? Why do transactions costs create difficulties in finding a private solution to the problem of pollution?

-Refer to Figure 15-8. Suppose the emissions reduction target is currently established at 8 million tons. What is the area that represents the cost of eliminating an additional 1 million tons?

If transactions costs are low, private bargaining will always result in an efficient solution to the problem of externalities.

-Refer to Figure 15-7. What is the incremental benefit of increasing the quantity of pollution reduction from Q_B to Q_E units?

A free market fails when

Which of the following is a possible solution when a scarce resource is subject to the tragedy of the commons?

If the social cost of producing a good or service exceeds the private cost,