Chap 10 Econ

An example of a rival good would be:

A sandwich

Which example does NOT apply a subsidy to solve negative externalities?

The government charges a cigarette tax of around $2.50 per pack.

A subsidy can induce people to consider the external _____ of the _____ externalities they create.

benefits; positive

When private bargaining is allowed to include bystanders, _____ because _____.

better outcomes are possible; externalities are considered

In the presence of externalities, market forces ignore the interests of _____, resulting in _____.

bystanders; an inefficient outcome for society

All of these options are able to solve negative externality problems EXCEPT:

corrective subsidies.

Club goods are a type of _____, since the amount produced will be _____ the socially efficient quantity.

local monopoly; below

Regulations should target _____ to avoid _____.

outcomes; stifling innovation

Which is an example of tragedy of the commons?

All of the above

The Kyoto Protocol set up a _____ by limiting the number of permits to emit harmful greenhouse gases like carbon dioxide and methane.

Cap and trade system

Public schools require students to have up-to-date vaccinations. How does this policy help with the externality problem?

It helps prevent an outbreak that can affect other students and faculty.

Which is NOT true about the solutions to externality problems?

Regulations result in the most efficient resolution of externalities.

The size of marginal external costs can be determined by:

S2 − S1 at each output level.

To limit negative externalities, the government can eliminate the overproduction by using the quantity regulation of _____ to the socially optimal quantity.

Setting a quota

An example of a public good would be:

Street lights

All the following have positive externalities, EXCEPT:

Taking antibiotics too often

What is a club good? Give examples.

They are goods that are non-rivalrous, but excludable. They include things such as satellite TV, private parks, and movie theatres.

Which example does NOT involve private bargaining to internalize an externality?

To reduce maintenance costs, an electric company replaces overhead wires with underground wires capable of carrying the same load.

When everyone owns something, they behave as if nobody owns it" is a restatement of the:

Tragedy of the commons

An example of a public good would be:

an interstate highway.

The owners of Jamal's Diner have lobbied their city council for lower business taxes on small businesses. The ordinance was finally passed, and several other businesses, including SuperSudz Car Wash a few blocks away, also saw their city tax burden lowered. The owners of Jamal's Diner were participants in the action and received a _____ from the tax cuts. The owners of SuperSudz Car Wash were not participants in the lobbying effort and received a _____ from the tax cuts.

benefit; positive externality

If policymakers use a pollution tax to control pollution, the tax per unit of pollution should be set:

equal to the marginal external cost at the economically efficient level of pollution.

Businesses can turn public goods into club goods by _____. However, they do not fully solve the problems inherent in public goods because they _____ the goods.

excluding nonpaying customers; underprovide

A solution to the free-rider problem is the government's power to _____, which is something businesses and individuals _____ have the power to do.

force people to pay for the goods they benefit from; do not

Banning smoking in public areas is an example of using _____.

laws and regulations to reduce negative externalities

Marginal social cost equals:

marginal private cost plus marginal external cost.

Goods that are _____ and _____ are known as common resources.

nonexcludable; rival

Under a cap-and-trade system, every unit of gas emission represents a(n) _____ because _____.

opportunity cost; every permit that has been used could have been traded

When all interested parties are included, externalities can be removed through _____.

private bargaining

All the following have negative externalities, EXCEPT:

sharing your insights in a group study.

In the face of positive externalities, the Rational Rule for Society says that the _____ occurs at the quantity where the marginal social benefit is equal to the _____.

socially optimal quantity; marginal social cost

Governments can increase the consumption of a product that creates positive externalities by:

subsidizing the production of the product so that the supply is increased and market price is reduced.

Public goods like _____ are often best managed when they are funded by _____.

the military; the government

Under a cap-and-trade system, what is a firm's opportunity cost of producing harmful gases?

the possible revenue from selling its permits

An example of a rival good would be:

tickets (concert)

Which is NOT considered a goal of the government in setting a quota instead of imposing a corrective tax?

to increase the marginal private cost to equal the marginal social cost

How does a cap-and-trade system act like a corrective tax?

A cap-and-trade system raises the opportunity cost of polluting the air.

What is a market failure?

It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost.

When people fail to factor in _____ externalities, they are less likely to engage in activities that are beneficial to _____.

positive; society

Overfishing in lakes and oceans produces a(n) _____ benefit to those who consume or sell the fish, but this creates a _____ externality by reducing the number of fish left in those areas.

private; negative