CH. 9 Econ

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What is the intent of a Pigouvian​ tax?

To induce producers of a negative externality to reduce production to the socially optimal level

Which of the following would be considered a true public​ good?

a road sign

Private provision of public goods is often accomplished through _____________, and is ___________ related to the overall wealth of the economy

charity, directly

A​ library's collection of​ e-books is a

club good

Radio spectrum is a

common pool resource

Command-and-control policies

could be used to mandate usages to businesses.

Socially accepted methods of behavior can _____________ internalizing of negative externalities. Financial rewards __________ achieve the same result.

encourage, can

Negative externalities cause a ___________ shift of the supply curve and _____________ in market quantity. Recognizing this deadweight loss _________ eliminate the externality

left, decrease, will not

Common pool resource goods are different from public goods because they are _______________, which can result in ________ externality due to _____________ demand

non-exclusive but rival, negative, increased

An individual or a firm can internalize an externality by​

paying the cost of the externality.

A mosquito control program in a city is a

public good

A video on YouTube is a

public good

The Coase Theorem will will breakdown when

when property rights are not clearly defined. transaction costs become high. there are a large number of agents.

Positive externalities will result in a _________ shift of the______ curve, there ___________ a deadweight loss with a positive externality

rightward, demand, is

Suppose the production of a particular good causes a negative externality. Based on market forces​ only, how will this impact the production levels for a factory if negative externalities are​ present?

It will produce the good above the socially efficient level.

Which of the following is not an​ externality

Jordan has lung cancer from smoking cigarettes.

Which of the following is not likely to be subject to the tragedy of the​ commons?

National defense.

Market inefficiencies result from all of the​ following, except:

Pecuniary externalities

How do public goods differ from common pool​ resources? Explain.

Public goods are non rival and common pool resources are rival

Which of the following would not be considered a common pool resource​ good?

Streetlight

Which of the following would be an example of the Coase​ Theorem?

The homeowners association provides a fireworks show that ends at 10 p.m.

All of the following statements about Pigouvian taxes are​ true, except:

They are designed to increase quantity toward optimal quantity.

Why is the market demand curve for public goods calculated as a vertical summation of individual demand​ curves?

because the public good is​ non-rival, so you and others can consume every unit of the good at the same time.

Externalities are called market failures because they​

cause markets to produce suboptimal social outcomes.

The free-rider problem arises when

does not pay for a good because nonpayment does not prevent consumption.

A corrective subsidy would be used when marginal social benefit is _____________________, than market demand. This causes the __________________, to internalize the externality.

greater, consumer

The market demand curve for a public good

is found by summing all of the​ individual's marginal benefit at a given quantity.

Negative externalities impose an additional cost​ that

is not explicitly recognized by the buyers and sellers in the market.

Health insurance is a

private good

When bargaining to deal with negative externalities

the cost falls on the party with the most to gain.

How does a​ command-and-control policy differ from a​ market-based policy? With a​ command-and-control policy ____________________ while with a​ market- based​ policy, ______________

the government directly regulates the allocation of resources, the government provides incentives for private organizations to internalize the externality

The​ free-rider dilemma occurs because

the marginal benefit to a group is different than to that of the individual.

Why is it difficult for the market to deliver socially efficient quantities of goods like clean air or street​ lighting?

they are public goods, you get to enjoy it even if you don't pay


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