Econ - Externalities ch. 16

If the current level of pollution is at a point at which the marginal social cost of pollution equals the marginal social benefit, then a. the optimal level of pollution has been reached. b. the current level of pollution exceeds the optimal level. c. the current level of pollution is below the optimal level. d. it must be the case that there is no pollution.

a. the optimal level of pollution has been reached.

An uncompensated cost that an individual or firm imposes on others is known as a. an unfair cost. b. an illegal cost. c. an external cost. d. an overflow cost.

c. an external cost.

If the current level of pollution is at a point at which the marginal social cost of pollution is less than the marginal social benefit, then a. the optimal level of pollution has been reached. b. it must be the case that there is no pollution. c. the current level of pollution is below the optimal level. d. the current level of pollution exceeds the optimal level.

c. the current level of pollution is below the optimal level.

The figure shows the marginal social benefit and marginal social cost arising from a harmful pollutant that is released into the atmosphere by a coal-fired electric plant. What is true at a level of pollution of 16 tons? a. The marginal social benefit exceeds the marginal social cost. b. The marginal social cost equals the marginal social benefit. c. The marginal social cost is zero. d. The marginal social cost exceeds the marginal social benefit.

d. The marginal social cost exceeds the marginal social benefit.

The socially optimal quantity of pollution is a. always zero. b. the amount of pollution society would choose if all costs and benefits were accounted for. c. the amount of pollution society would choose if the marginal social benefit of pollution were zero. d. the amount of pollution society would choose if the marginal social cost of pollution were zero.

d. the amount of pollution society would choose if the marginal social cost of pollution were zero.

The Coase theorem asserts that a. negative externalities are most successfully addressed by government intervention. b. transaction costs are always low. c. negative externalities are not harmful. d. the private market can successfully resolve externalities if transaction costs are low.

d. the private market can successfully resolve externalities if transaction costs are low.