Public Economics Mid Term Prep (2)
Which of the following statements is true?
The optimal quantity of pollution reduction is at equilibrium.
The Case Theorem states that
if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities
If there is pollution in producing a product, then the market equilibrium price
is too low and equilibrium quantity is too high
Because producers do not bear the external cost of pollution
private production exceeds the economically efficient level.
Economists argue that the level of pollution should be
reduced to the point where the marginal benefit of pollution reduction is equal to the marginal cost of pollution reduction to society
The marginal benefit of reducing pollution curve is the same curve as
the demand for pollution reduction curve
In Economics, the optimal level of pollution is:
the level for which the net benefit from reducing the pollution is the greatest
The marginal cost of reducing pollution curve is the same curve as
the supply of pollution reduction curve
What is the incremental cost of increasing the quantity of pollution reduction from QB to QE units?
the value of the area QB BE QE QB: equilibrium, BE: Marginal Cost Curve/aka: Supply curve
What is the incremental benefits of increasing the quantity of pollution reduction from QB to QE units?
the value of the area QB BF QE QB: equilibrium, BF:Marginal Benefit curve/aka Demand curve
