Exam 5: Externalities- Problems and Solutions

Suppose government subsidized the consumption of education by giving education vouchers to parents to spend at the school of their choice.The subsidy would:

Suppose government wants to get the amount of pollution right.Which instrument for intervention should the government choose?

Which type of approach does the Environmental Protection Agency take toward resolving externality problems?

Which of the following suggests that when an investment has a personal cost but a common benefit,individuals will invest too little?

In a free market with pollution and no government intervention,the market equilibrium quantity of pollution reduction is reached when:

People who live on the edge of small lakes sometimes have break walls constructed on their property by the shore.A break wall is typically a vertical column of wood or concrete that prevents high water levels from covering part of the owner's property,reducing the size of the beach,and/or eroding the yard.However,several communities have restricted property owners from building break walls.Can you think of a reason for that? Hint: Think about potential externalities of building a break wall.

When are quantity restrictions not the same as price restrictions (via taxes)? Describe one situation in which the government would be better off imposing quantity restrictions than setting a tax,and explain why quantity restrictions are better in that case.

If SUVs produce a negative externality,taxing the buyers of SUVs would do which of the following?

Suppose that factories in Chicago,Illinois,and Gary,Indiana,produce pollution that affects people living in western Michigan.Even though the polluting plants and affected individuals can be identified,the externality cannot be resolved privately because of the large number of both polluters and affected individuals.This is an example of:

In private equilibrium,a positive production externality will lead to __________; a negative consumption externality will lead to ___________.

With respect to solving a problem of a negative externality,the assignment problem refers to the difficulty in determining who:

If government knows the private and social benefit and cost curves associated with reducing pollution,which type of instrument for intervention should the government choose?

Which of the following results when shared ownership of property rights gives each owner power over all the others?

Your neighbor Gabriella plays loud music that irritates you and the rest of her neighbors.She agrees to turn down the music by 5 decibels for every $25 she receives from her neighbors,and even though you and your neighbors collectively value reductions of 5 decibels at more than $25 per person,no one pays.This is an example of:

Suppose your neighbor enjoys riding around his yard on a rather loud dirt bike.What kind of externality is this (positive or negative,consumption or production)? What would the government have to do,if anything,to facilitate a Coasian solution to this externality? Would the result be socially optimal? Explain.

The purchase of coal by a utility is best described as a:

Suppose your neighbor decides to secure his single-room air conditioner with duct tape and black plastic,creating a view from your house that you consider visually unappealing.The duct tape and black plastic are an example of:

If plumes of exhaust from passing buses are inhaled by bicyclists,a _________ externality is being imposed on __________.

The success of the Coase theorem depends crucially on:

_____ is a problem that causes the market economy to deliver an outcome that does not maximize efficiency.