Intro to Microeconomics Chapter 16+17

What is an example of a good that is excludable in consumption

A bicycle

True or False: Goods are said to be rival in consumption because they are substitutes in consumption, such as coffee and tea or road travel and air travel

False

True or False: The economically efficient level of an externality is zero

False

What is an example of an artificially scarce good?

Music that is downloadable from the Internet for a fee

Suppose the production of roses generates a positive externality in that travelers enjoy the scenic beauty of the garden. An appropriate government policy yielding the efficient outcome would be:

Pigouvian subsidy

Although most citizens have access to police protection, they also take measures, such as putting locks on their doors, to protect themselves. For most citizens police protection is a(n) _____ good, while self-protection is a(n) ______ good.

Public; private

According to the Coase Theorem, when negative externalities are present, a market will:

Reach an efficient solution if transaction costs are low and property rights are well-defined

True or False: Emissions taxes and tradable emissions permits both ensure that any given reduction in total pollution is achieved at the lowest possible cost. This is not the case for environmental standards, since they fail to ensure that those who can reduce pollution most cheaply are in fact the ones to do so.

True

True or False: Since individuals ignore the effect of their use on the amount of a resource remaining for others, common resources are subject to overuse when left to the private market.

True

True or False: The efficient level of provision of a public good is the level at which its marginal social benefit is equal to the marginal social cost of its production

True

True or False: The optimal Pigouvian tax is equal to the marginal social cost of pollution at the socially optimal quantity of pollution

True

True or False: if externalities are fully internalized, an outcome is efficient even without government intervention

True

public good

a good whose consumption is non excludable and non rival

Emissions tax

a more efficient way to reduce pollution than an environmental standard because it equalizes marginal benefit of pollution from all sources

The source of the inefficient use of artificially scarce goods is similar to the source of inefficiencies created by

a natural monopoly

When government attempts to reduce climate change by establishing a minimum level of fuel efficiency on new cars, it is using a(n)

environmental standard

Television programs are non-rival because

more than one person can consume the same unit of the good at the same time

In the United Kingdom, most public television programming is paid for by a yearly license fee assessed on every household. Television detection vans go through neighborhoods to detect unlicensed households and keep them from viewing without paying. This is a good example of the ____ provisions of ______

public; goods that are made artificially excludable in consumption

Public goods should be produced up to the point at which the marginal cost of production equals:

the sum of the individual marginal benefits from all consumers of that unit

If an emissions tax is too low:

there will be too much pollution

An advantage of tradable emissions permits is that

they provide incentives for firms to develop technologies that are less polluting

For a non excludable good like national defense, the private market will lead to ____of the good

too little production