ecn 2010 chap 10 & 11

An ideal corrective subsidy equals the external _______ from an activity with a _______.

benefit; positive externality

Governments can improve market outcomes for

both public goods and common resources.

Brad owns 5 acres of land. Brad sells the land to a real estate developer who builds a subdivision with 10 houses. The land is an example of a good that is

both rival in consumption and excludable.

_____ are generally associated with negative externalities. The problem associated with these goods is known as _____

common resources; tragedy of the commons

A good is excludable if

people can be prevented from using it.

Private companies are most likely to invest in medical research if

they will produce a specific product for which they may receive a patent.

Which of the following illustrates the concept of a negative externality?

A college student plays loud music on their new stereo system at 2:00 a.m.

Scenario 11-1​ Becca is a single mother of two young children who spend their days at a daycare center while Becca goes to work. The daycare center closes at 5:30. If parents do not pick up their children at or before 5:30, the daycare center charges a late fee of $5 per child for every 10 minutes the parent is late. Refer to Scenario 11-1. Due to traffic, Becca expects to be 20 minutes late to pick up her children. Which of the following most accurately describes the set of prices that she would be willing to pay for a variable toll road that would get her to the daycare center on time?

Any price less than $20

Flu shots provide a positive externality. Suppose that the market for vaccinations is perfectly competitive. Without government intervention in the vaccination market, which of the following statements is correct?

At the current output level, the marginal social benefit exceeds the marginal private benefit.

The government orders every factory to adopt a new technology, which reduces carbon-dioxide emissions into the atmosphere.

Command-and-Control Policy

The government agrees to reimburse all factories that purchase new, emissions-reducing technology in order to provide cleaner air.

Corrective Subsidy

The government charges factories $500 for every ton of carbon dioxide they emit.

Corrective Tax

Internalizing externalities attempts to do which of the following?

Correctly assign costs and benefits.

Miguel, Maria, and Marcos all would like a place to sit while waiting at their children's bus stop. The neighborhood association is considering installing several park benches at the bus stop. Miguel values the benches at $20, Maria at $30, and Marcos at $40. The park benches and labor for installation cost $100. If Miguel, Maria, and Marcos are the only residents who value the benches, what should the neighborhood association do?

Do not install the park benches because the costs outweigh the benefits.

The goal of internalizing externalities is to:

Equate social costs and benefits with private costs and benefits.

How is the Free Rider problem usually resolved?

Government provision of public goods.

Which of the following topics does the Coase Theorem address?

Markets and externalities.

Which of the following goods is the best example of a public good

Music that is broadcast over the airwaves by a privately-owned FM radio station.

Wireless, high-speed internet is provided for free in the airport of the city of Communityville. At first, only a few people use the service. In this case, the service is: _____ Eventually, as more people find out about the service and start using it, the speed of the connection begins to fall. Now the service is: _____ True or False: One possible way to solve the problem that arises from the increased usage is to charge a fee for using this service.

Not excludable and not rival in consumption; Not excludable and rival in consumption; true

Which of the following is most closely associated with the Tragedy of the Commons?

Private Marginal Benefit > Private Marginal Cost.

Which of the following concepts is most closely associated with the Coase Theorem?

Property rights.

Why does the Tragedy of the Commons take place?

The commons is destroyed by people pursuing what is in their own best interest.

Which of the following is not a reason why government agencies subsidize basic research?

The government wants to attract the brightest researchers away from private research firms.

The government limits total carbon-dioxide emissions by all factories to 250,000 tons per ten years. Each individual factory is given the right to emit 280 tons of carbon dioxide, and factories may buy and sell these rights in a marketplace.

Tradable Permit System

Suppose a politician is critical of a government pollution permit policy that they say allows companies to buy and sell the right to pollute. They argue that the public's right to breathe clean air and the health of the planet require real regulation instead of this type of government policy. Which of the following arguments best describes why the majority of economists would disagree with their statement?

Tradable pollution permits in a free market is typically more efficient than government regulation.

Zaria and Hannah are roommates. Zaria assigns a $30 value to smoking cigarettes. Hannah values smoke-free air at $15. Which of the following scenarios is a successful example of the Coase theorem?

Zaria pays Hannah $16 so that Zaria can smoke.

Fred does not pay for a good and thus does not consume it. The good is said to have what property?

exclusion

_____ are generally associated with positive externalities. The problem that arises from these externalities is known as ______

public good; the free rider problem

The Free Rider problem is most often associated with:

public goods

Which goods are defined as non-rivalrous in consumption and not subject to exclusion?

public goods

Which of the following is NOT a way of internalizing technology spillovers?

taxes

The free-rider problem is least likely to occur when _______.

the number of beneficiaries is small and it is possible to prevent people from benefiting