Chapter 9 HW
Which of the following statements regarding internalizing an externality is true?
It means agents account for the full costs and benefits of their actions.
Which of the following statements regarding social enforcement mechanisms is not true? (It reduces the net benefit to society, Shame, guilt, and the risk that we will be publicly decried are the various forms of it, It is enforced by official government regulations and results in a stiff financial penalty if not followed, It is a private solution to the externality problem that invokes a moral code that one should 'do the right thing'.)
It reduces the net benefit to society, It is enforced by official government regulations and results in a stiff financial penalty if not followed.
Market inefficiencies result from all of the following, except:
Pecuniary externalities. (Negative externalities, Positive externalities, Social benefits or costs YES)
Which of the following is not an example of when the free market fails to generate maximum social surplus?
Private goods
Which of the following would be considered a true public good?
a road sign
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.
Private provision of public goods is often accomplished through ? and is ? related to the overall wealth of the economy.
charity; directly
Private provision of public goods is often accomplished through ?and is ? related to the overall wealth of the economy.
charity; directly
The free-rider problem arises when an individual
does not pay for a good because nonpayment does not prevent consumption
Socially accepted methods of behavior can ? internalizing of negative externalities. Financial rewards ? achieve the same result.
encourage; can
A corrective subsidy would be used when marginal social benefit is ? than market demand. This causes the ? to internalize the externality.
greater; consumer
Which of the following is the correct definition of marginal social cost?
marginal private cost+marginal external cost; marginal private cost+marginal cost of externality.
The business generated for other stores by Ms. Daisy's flower display is an example of a ? externality. You respond to the business leaders' request by giving Ms. Daisy money to buy more flowers. Giving Ms. Daisy money to buy more flowers is an example of a ? When you want to encourage an activity, you should ? it, and when you want to discourage an activity, you should ? it.
positive; pigouvian subsidy; subsidize; tax
You decide to install some early warning tornado sirens. However, there is no money left in the county budget, so you ask each citizen to donate some money to build the system. Many citizens donate money to help build the warning system; however, Ms. Nancy, who is wealthy, decides she is not going to donate. The early warning sirens are an example of a ?, and Ms. Nancy represents a ?. Public goods are ? in rivalry and ? in excludability.
public good; free rider; low; low
Why is it difficult for the market to deliver socially efficient quantities of goods like clean air or street lighting? These are examples of ?; therefore, even if you ? for the good you still ?.
public goods; do not pay; get to enjoy it
When bargaining to deal with negative externalities
the cost falls on the party with the most to gain.
The free-rider dilemma occurs because
the marginal benefit to a group is different than to that of the individual
All of the following statements about Pigouvian taxes are true
They cause the market supply curve to shift left, they use a market based approach, the per-unit tax should equal the marginal external cost (not they are designed to increase quantity toward optimal quantity)
Positive externalities result in a ? shift of the ? curve. There ? a deadweight loss with a positive externality.
rightward; demand; is
When bargaining to deal with negative externalities
the cost falls on the party with the most to gain
Negative externalities cause a ? shift of the supply curve and ? in market quantity. Recognizing this deadweight loss ? result in elimination of the externality.
leftward; decrease; will not
Command-and-control policies
could be used to mandate usages to businesses.
Common pool resource goods are different from public goods because they are ? which can result in ? externalities due to ? demand.
non-exclusionary but rival; negative; increased
An individual or a firm can internalize an externality by
paying the cost of the externality.
Which of the following would not be considered a common pool resource good?
streetlight
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.
n the case of the negative externality, the socially efficient output will be ? relative to the market quantity.
low
In a free market, efficient firms will produce where ? equals ?
marginal cost; marginal revenue
The noxious odor from Dwight's hog farm is a ? externality. If this externality from Dwight's farm is left unaddressed, then Dwight will continue to ? in regards to the social surplus optimum. Which method is not a recommended approach supported by externality theory to deal with this problem?
negative; overproduce; nonprofit intervention
Which of the following statements are true regarding externalities?
Deadweight loss can be either a foregone benefit or the total cost of the externality to society; A negative externality occurs when an economic activity has a spillover cost to a bystander.
What approach would be the least effective way to deal with free riders?
Exclude citizens from benefiting from the good or service.
Which of the following is not an externality? (Jordan has lung cancer from smoking cigarettes, Rochelle has asthma caused by the pollution of a local factory near her home, Alisha did not sleep well because her neighbor was playing loud music)
Jordan has lung cancer
Which of the following is not likely to be subject to the tragedy of the commons?
National defence
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, The per-unit tax should equal the marginal external cost., They use a market based approach, They cause the market supply curve to shift left.)
They are designed to increase quantity toward optimal quantity.
