Econ Externalities

(Figure 74-1: The Socially Optimal Quantity of Pollution) In the figure, without government intervention: a. firms will continue to pollute until the marginal social benefit is zero. b. firms will continue to pollute until the marginal social benefit is $200. c. the optimal quantity of pollution will occur. d. there will be no pollution. e. firms will continue to pollute until the marginal social cost of pollution is zero.

A

. The proposition that if transaction costs are low enough, then the private market can achieve an efficient outcome regardless of which of the affected parties hold the property rights, is known as the: a. Coase theorem. b. property rights paradigm. c. market rights theorem. d. green environment paradigm. e. Gini theorem.

A

If the marginal benefit received from pollution is greater than its marginal cost, then: a. society's well-being can be improved if the quantity of pollution decreases. b. society has achieved its socially optimal level of pollution. c. the market is producing too much pollution. d. a Pigouvian tax on polluters can improve society's well-being. e. the market is producing too little pollution.

A

The proposition that if bargaining costs are sufficiently low, then the market can achieve an efficient outcome, is referred to as the: a. Coase theorem. b. property rights paradigm. c. market rights theorem. d. efficient environment paradigm. e. Lorenz theorem.

A

With tradable emissions permits, the main problem is determining the ________, while with emissions taxes the main problem is determining the ________. a. optimal quantity of pollution; optimal tax rate b. optimal price of the permits; optimal level of pollution c. optimal quantity of pollution; marginal social benefit of pollution d. marginal social cost of pollution; optimal tax rate e. optimal price of the permits; optimal tax rate

A

(Figure 75-1: Efficiency and Pollution) If the government imposed an environmental standard that did not allow the quantity of pollution to exceed 20 tons, there would be: a. a socially optimal quantity of pollution. b. too little pollution, because the marginal social benefit of pollution would exceed the marginal social cost of pollution. c. too much pollution, because the marginal social cost of pollution would exceed the marginal social benefit of pollution. d. too much pollution, because any pollution is too much pollution from an economist's perspective. e. too little pollution, because the marginal social cost of pollution would exceed the marginal social benefit of pollution.

B

(Figure 75-8: Marginal Private Benefits and Marginal Social Benefits) If government achieves this socially optimal level, it does so by: a. imposing a per-unit tax equal to P1 - P2. b. providing a per-unit subsidy of P0 - P2. c. mandating consumption at output level Q1. d. leaving the quantity at the initial private market-clearing quantity and price. e. providing a per-unit subsidy of P1 - P2.

B

Flu vaccines often provide both private benefits to individuals and positive external benefits to other members of society. As a result, without government intervention one would find: a. too many flu vaccines being produced since external benefits would not be considered. b. too few flu vaccines being produced since external benefits would not be considered. c. the optimal amount of flu vaccines would be produced since external benefits would not be considered. d. a shortage of flu vaccines. e. zero deadweight loss in the market for flu vaccines.

B

If a coal-powered electrical generator discharges smoke into the air and causes uncompensated costs and discomfort to residents of a town, this situation is an example of a(n): a. quasi-public good. b. external cost. c. external benefit. d. specific tax. e. Pigouvian tax.

B

There are two plants (A and B) in an industry. To reduce pollution, the government has imposed environmental standards forcing each plant to cut emissions by 60%. At the emissions standard, the marginal social benefit of pollution for Plant A is $500 and the marginal social benefit of pollution for Plant B is $125. The same level of pollution can be achieved at a lower cost by: a. forcing Plant A to reduce emissions and allowing Plant B to increase emissions. b. allowing Plant A to pollute more and Plant B to pollute less. c. forcing both plants to reduce emissions. d. allowing both plants to pollute more. e. imposing a $500 tax upon Plant A and a $125 tax upon Plant B.

B

(Figure 74-4: Pollution and Efficiency) If this market produced ________ units, then ________. a. 40; MSB = MSC b. 30; MSB < MSC c. 40; MSB < MSC d. 30; MSC < MSB e. 20; MSC > MSB

C

Betsy loves to garden and her rose garden is enjoyed by everyone in her neighborhood. Because her consumption of rosebushes provides a positive externality to the community, the government should: a. provide Betsy a subsidy because the market quantity of rosebushes is greater than the socially optimal quantity. b. impose a tax on Betsy because the market quantity of rosebushes is lower than the socially optimal quantity. c. provide Betsy a subsidy because the market quantity of rosebushes is lower than the socially optimal quantity. d. impose a tax on Betsy because the market quantity of rosebushes is greater than the socially optimal quantity. e. do nothing; the unregulated market is producing the efficient quantity of rosebushes.

C

Positive externalities are: a. similar to negative externalities in their ease of measuring marginal benefits. b. likely to be solved with the use of a Pigouvian tax. c. difficult to measure since marginal benefits are hard to observe. d. result from greater than optimal production of a good. e. seen whenever production of a good creates environmental pollution.

C

The marginal external cost of a good or activity equals the amount: a. by which the marginal social benefit curve is higher than the demand curve. b. by which the marginal social cost curve is lower than the supply curve. c. by which the marginal social cost curve is higher than the supply curve. d. at which the marginal social benefit curve intersects the demand curve. e. by which the marginal social benefit curve is lower than the demand curve.

C

(Figure 75-7: Positive Externalities and Production of Semiconductor Chips) If the socially optimal production of chips is 600, the government could achieve the socially optimal level of production by granting a Pigouvian subsidy of: a. $5. b. $10. c. $15. d. $20. e. $30.

D

(Figure 75-8: Marginal Private Benefits and Marginal Social Benefits) If government does intervene and encourages the market to produce and price at the socially optimal level, what output and price will that be? a. Q0; P0 b. Q1; P0 c. Q1; P2 d. Q2; P1 e. Q1; P1

D

According to the Coase theorem, when negative externalities are present a market will: a. always reach an efficient solution. b. reach an efficient solution only if the number of bargaining parties is large. c. reach an efficient solution only if the government intervenes in the market. d. reach an efficient solution only if the negative externalities are offset by positive externalities. e. reach an efficient solution if transaction costs are low.

E

Assume the price of a tradable emissions permit for a ton of sulfur dioxide is $150. Which of the following is incorrect? a. A firm that buys permits has an incentive to limit pollution up to the point at which the marginal benefit of emissions is equal to $150. b. A firm that has more permits than it plans to use has an incentive to limit pollution up to the point at which the marginal benefit of emissions is equal to $150. c. Firms have a financial incentive to install pollution abatement technologies so that they do not need to purchase pollution permits. d. The opportunity cost of emitting a ton of sulfur dioxide is $150 for all firms. e. The opportunity cost of emitting a ton of sulfur dioxide is $75 for all firms.

E

The marginal cost of pollution emissions ________ as the quantity of pollution emissions ________. a. decreases; increases b. remains constant; increases c. increases; decreases d. remains constant; decreases e. increases; increases

E

When a vaccination program generates a positive externality, the: a. market demand curve is above the marginal social benefit curve. b. market will produce the efficient level of output. c. marginal cost of production is below the market demand curve. d. market will produce more than the efficient level of output. e. market demand curve is below the marginal social benefit curve.

E