Exam 15: Externalities , Environmental Policy and Public Goods

-Refer to Figure 15-5. If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does D₁ represent?

Which of the following would result in a positive externality?

-Refer to Figure 15-4. Why is there a deadweight loss?

When production generates a negative externality, the true cost of production is the

State and local governments subsidise university students with grants and low-interest loans. The loans and subsidies are examples of

Suppose a tax equal to the value of the marginal external cost at the optimal output is imposed on a pollution-generating good. All of the following will result from the tax except

-Refer to Figure 15-14. The current market equilibrium output is partly the result of overfishing. In that case, what does S₁ represent?

-Refer to Figure 15-5. Suppose the current market equilibrium output of Q₁ is not the economically efficient output because of an externality. The economically efficient output is Q₂. In that case, diagram shows

It is difficult for a private market to provide the economically efficient quantity of a public good because

When there is a negative externality, the private cost of production ________ the social cost of production.

-Refer to Figure 15-4. What is the deadweight loss from producing at the market equilibrium?

-Refer to Figure 15-10. One way to obtain the economically efficient amount of chicken pox vaccinations is for governments to subsidise these vaccinations. What is the size of the per-vaccination Pigovian subsidy that the government must provide to internalise the external benefits?

Assume that production from an electric utility caused acid rain and that the government imposed a tax on the utility equal to the cost of the acid rain. This is an example of

Consider a situation in which a utility company emits high levels of sulphur dioxide and the company is not liable for the damages its pollution causes. According to the Coase theorem, government action is ________ to achieve an ________ amount of pollution.

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

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

Overuse of a common resource may be avoided by all of the following methods except

-Refer to Figure 15-2. The true marginal cost of the last unit produced is represented by the price

Private solutions to the problem of externalities are most likely when

If there are no externalities, a competitive market achieves economic efficiency. If there is a negative externality, economic efficiency will not be achieved because