Exam 15: Externalities, Environmental Policy and Public Goods

Figure 15-5 Figure 15-5 shows a market with an externality.The current market equilibrium output of Q₁ is not the economically efficient output.The economically efficient output is Q₂. -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

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

Compare two situations.(A)A firm is not legally responsible for damages that result from air pollution caused by its production of steel.(B)A firm is legally responsible for damages that result from its production of steel.Ronald Coase argued that

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.

Figure 15-4 Suppose there are several paper mills producing paper for a market.These mills,located upstream from a fishing village,discharge a large amount of wastewater into the river.The waste material affects the number of fish in the river,and the use of the river for recreation and as a public water supply source.Figure 15-4 shows the paper market.Use this Figure to answer the following question(s). -Refer to Figure 15-4.What is the deadweight loss from producing at the market equilibrium?

When a negative externality exists,the private market produces

Negative externalities and the tragedy of the commons are problems that have a common source.What is this common source?

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

Private costs

Figure 15-2 Figure 15-2 shows a market with a negative externality. -Refer to Figure 15-2.The deadweight loss due to the externality is represented by the area

When there is a positive externality in a free market,too much of the good is produced and consumed.

Figure 15-9 Companies producing toilet paper bleach the paper to make it white.The bleach is discharged into rivers and lakes and causes substantial environmental damage.Figure 15-9 illustrates the situation in the toilet paper market. -Refer to Figure 15-9.An efficient way to get the firm to produce the socially optimal output level is

The market demand for a public good can be determined by

An externality is an example of a market failure.

How does a positive externality in consumption reduce economic efficiency?

The efficient output level of a public good occurs where the

Figure 15-14 Figure 15-14 shows the market for Atlantic salmon,a common resource.The current market equilibrium output of Q₁ is not the economically efficient output.The economically efficient output is Q₂. -Refer to Figure 15-14.The current market equilibrium output is partly the result of overfishing.In that case,what does S₂ represent?

The free rider problem refers to a situation in which

Which of the following is an example of a non-excludable product?

Consider the following characteristics: A.low transactions costs B.small levels of pollution C.high levels of pollution D.clear assignment of property rights. Which of the above are assumptions behind the Coase Theorem?