Micro Chapter 16

Network externalities are often

a reason for natural monopolies.

A good is subject to a network externality when

an increase in the number of other people using the good increases its value to an individual.

Both emissions taxes and tradable emissions permits

are efficient cost-minimizing methods of pollution reduction

A Pigouvian subsidy is a payment

designed to encourage activities yield external benefits

For the same amount of pollution emitted, an emissions tax is said to be more efficient than is an environmental standard because all polluters

emit pollution up to the point at which the marginal benefit of polluting is equal to the emissions tax

The marginal social benefit received from pollution is equal to its marginal social cost in the market for highly polished glass. In this situation

firms in the market produce the socially optimal level of pollution

A Pigouvian tax should be used to decrease the quantity of a good when its marginal cost is

greater than its marginal cost of production

Research clusters typically emerge

near major universities

A good is a subject to a _________ when the value of the good to an individual is higher when a large number of other people use the good.

network externality

External benefits are associated with the production of batteries. Without government regulation, the market will

price batteries at less than the marginal social benefit

According to the Coase theorem, when negative externalities are present, a market will

reach an efficient solution if transaction costs are low and property rights are well-defined

The efficient rate of emissions occur when

the change in social benefits and the change in social costs from an additional unit of emissions are equal

If the current level of pollution is at a point where the marginal cost of pollution is less than the marginal social benefit then

the current level of pollution is below the optimal level

The marginal social benefit of preserved farmland accrues to

the farmers residential neighbors

Given the general agreement that pollution is undesirable and social welfare is increased by reducing pollution, the optimal level of pollution in a society is

the level at which the marginal cost is equal to the marginal benefit

If the current level of pollution is at a point where the marginal cost of pollution EQUALS the marginal social benefit, then

the optimal level of pollution has been reached