Micro assignment 7

The essential cause of the tragedy of the commons is the fact that:

one person's use of a commonly held resource imposes an external cost on others.

The tragedy of the commons refers to the

overuse of resources that have no price.

Carmen listens to opera music every evening when she gets home from work. Carmen loves listening to opera, but her neighbor Paul, who can also hear the music, hates it. If Paul is the only person besides Carmen who can hear the music, then Carmen's music generates:

a negative externality

Given that most people like the smell of baking cinnamon rolls and dislike the smell of burning tires, baking cinnamon rolls generates ______ externality, and burning tires generates ______ externality.

a positive, a negative

The Coase theorem states that if private parties can negotiate the purchase and sale of the right to perform activities that cause externalities, then they:

can always arrive at efficient solutions to the problems caused by externalities.

Numerous studies have shown that breathing second-hand cigarette smoke is harmful to your health. This suggests that a tax on cigarettes will

increase total economic surplus

A cost of an activity that falls on people not engaged in the activity is call a(n):

negative externality

If an activity generates a positive externality, the government can increase total economic surplus by ______ the activity, and if an activity generates a negative externality, the government can increase total economic surplus by ______ the activity.

subsidizing; taxing

If the marginal cost of reducing pollution is positive, then

the optimal amount of pollution is greater than zero.

Lunch in Jamie's dorm is an all-you-can-eat buffet, served from 11 a.m. until 1 p.m. By noon, the buffet is picked over, and by 12:30, there are very few popular items left. The garbage bins, though, are full of food. The buffet in Jamie's dorm is an example of:

the tragedy of the commons.

If the market equilibrium quantity is greater than the socially optimal quantity, one can infer that:

there is a negative externality associated with this good