ECON 202- CHAPTER 10

A positive externality will cause a market to produce

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Dog owners do not bear the full cost of the noise their barking dogs create and often take too few precautions to prevent their dogs from barking. Local governments address this problem by

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A command-and-control policy is another term for a

government regulation

With a corrective tax, the supply curve for pollution is

horizontial

Externalities tend to cause markets to be

inefficient

A negative externality will cause a private market to produce

more than is socially desirable

A cost imposed on someone who is neither the consumer nor the producer is called a

negative exterality

According to the Coase theorem, in the presence of externalities

private parties can bargian to reach an efficiant outcome

According to the Coase theorem, private markets will solve externality problems and allocate resources efficiently as long as

private parties can bargian with sufficently low transaction costs

Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then

the equalibrium quantity of cigs smoked will be GREATER than the socialy optimal quantity