Exam 17: Externalities and Public Goods

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The consultants calculate the marginal social cost of production to be MSC = 2Q+30 and the marginal private cost of production to be $M P C = Q$ +30. The market demand curve for the industry can be expressed as P = 60-Q. What is the socially optimal level of output?

In public goods markets, the efficient provision of the public good is determined by

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The consultants calculate the marginal social cost of production to be MSC = 2Q+30 and the marginal private cost of production to be $M P C = Q$ +30. The market demand curve can be expressed as $P = 60 - Q$ . If the consultants have accurately measured the impact of the pollution externality, the equation of the marginal external cost is:

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The marginal social cost production can be expressed as MSC = 2Q + 30. The consultants calculate the marginal private cost production to be MPC = Q+30. The market demand curve can be expressed as $P = 60 - Q$ . If the consultants have accurately measured the impact of the pollution externality, the $\underline{\text{change}}$ in social surplus from moving to the social optimum (rather than at the private optimum) is

Which of the following is a key feature of a public good?

According to the Coase Theorem, in the absence of bargaining costs,

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The consultants calculate the marginal social cost of production to be MSC = 2Q+30 and the marginal private cost of production to be $M P C = Q$ +30. The market demand curve can be expressed as $P = 60 - Q$ . If the consultants have accurately measured the impact of the pollution externality, the cost of the externality at the market equilibrium (i.e. where the externality is not taken into account in production decisions) is

In markets with externalities or public goods,

An externality arises when

When the government can set emissions standards for polluting industries, which of the following statements is correct?

An environmental economic consulting firm is hired to measure the negative externalities associated with the pollution from an industry. The consultants calculate the marginal social cost of production to be MSC = 2Q+30 and the marginal private cost of production to be $M P C = Q$ +30. The market demand curve can be expressed as $P = 60 - Q$ . The sum of the consumer surplus plus producer surplus at the market equilibrium (i.e. the equilibrium where production decisions do not take into account the externality) is:

The efficient amount of pollution in society

A non-rival good

The Coase Theorem implies that victims of pollution should be able to pay polluters not to pollute if the victims value a reduction in pollution more than the polluters value the production of the pollution. Which of the following does not explain why this type of payment does not work in "real life"?

Suppose that an industry emits a chemical that pollutes the ground water. Without considering the effects of the pollution, the industry has a marginal private cost curve of MPC = Q+30. The market demand curve is $P = 60 - Q$ , while the marginal social cost curve is MSC = 2Q + 30. How can the optimal level of emissions fee best be depicted on a graph in this problem?

An example of a positive externality is

Suppose that an industry emits a chemical that pollutes the ground water. Without considering the effects of the pollution, the industry has a marginal private cost curve of MPC = Q+30. The market demand curve is $P = 60 - Q$ , while the marginal social cost curve is MSC = 2Q + 30. What is the socially optimal emissions standard?

What must be true for the provision of wireless service in an airport to be considered a public good?

Suppose that a smoker and a non-smoker are seated next to each other in a restaurant. This restaurant does not offer a non-smoking section. The smoker is indifferent between 1) smoking and 2) not smoking and consuming a $6 dessert. The non-smoker values being able to eat in a smoke-free environment at $10. According to the Coase Theorem, and assuming no bargaining costs, what will happen?

Suppose that an industry emits a chemical that pollutes ground water. Without considering the effects of the pollution, the industry has a marginal private cost curve of MPC = Q+30. The market demand curve is $P = 60 - Q$ , while the marginal social cost curve is MSC = 2Q + 30. What level of emissions fee would achieve the socially optimal level of output?