Microeconomics: Chapter 13 Graded Homework

Which of the following is NOT a reason why standards for reducing pollution are popular?

They lead each firm to have the same abatement costs.

(Table: Pollution Permits) The table shows the current pollution levels for each firm and the cost of abatement on a per ton of glop basis. If the government does not know the cost of abatement for each firm, then the total cost of cleaning up 80 tons of glop using pollution permits would be:

$1,100

Which discount rate would result in society devoting the most resources to long-run environmental management?

1%

(Table) Based on the table, if the marginal benefit increased by $300,000 at each level, the new optimal quantity would be:

2,500

Which of these is both finite and nonrenewable?

Helium, gold, and copper are all finite and nonrenewable

Which of these is(are) true? I. The tragedy of the commons is MOST associated with pure private goods. II. Highway congestion is an example of the tragedy of the commons because a new driver fails to consider the external costs of his using the road. III. The tragedy of the commons is NOT an example of market failure.

II only

Which of these is an example of consumers creating a negative externality?

Litter is found in an area around a fast-food restaurant

All of these are considered negative externalities, EXCEPT:

NEGATIVE EXTERNALITIES: cigarette smoke dogs barking noise from a neighbor's house EXCEPT: overstock of a flue vaccine.

(Figure: Nail Polish Externalities) Based on the figure, Sp (MPC) represents the private supply curve of a particular type of nail polish, the manufacture of which is associated with the release of toxic chemicals into the atmosphere. SS (MSC) includes the cost of that toxicity borne by others. What is the socially optimal price of this nail polish?

P2

(Figure: Nail Polish Externalities) Based on the figure, Sp (MPC) represents the private supply curve of a particular type of nail polish, the manufacture of which is associated with the release of toxic chemicals into the atmosphere. SS (MSC) includes the cost of that toxicity borne by others. What area represents the total externality cost of this nail polish?

abdc

(Figure: Determining Consumer and Producer Surplus) Based on the graph, point _____ represents producer surplus.

b; bottom half of triangle

An oil field lies beneath the border of Oklahoma and Texas. Both states drill wells every 100 yards, and in two weeks, the field loses all its pressure and ability to produce, leaving 80% of the oil in the ground. This consequence is an example of market failure due to:

common property resource.

Amtrak exhibits _____, and a can of Budweiser is a _____ product.

excludability; rival

The Coase theorem claims that, in the case of tobacco:

it does not matter who is given the property rights to the air, as long as the parties involved are allowed to bargain.

In a 2008 case before the Supreme Court regarding older power plants and how best to protect fish and aquatic organisms, Justice David Souter remarked, "The difficulty that I have is if you are going to apply . . . a cost-benefit analysis, I'm not sure how it would work. Are a thousand plankton worth a million dollars?" Justice Souter's question points out the difficulty of:

measuring nonmarket or intangible aspects of public projects.

Spraying for mosquito control in a local community is an example of a public good because it is:

nonrival and exhibits nonexcludability.

Mike constructed a beautiful backyard landscape. He also built a tall wooden fence around his yard. With the fence in place, the good that the landscape brings to the neighborhood becomes a:

private good because Mike can exclude people from enjoying the landscape.

The tragedy of the commons applies to goods that are:

rival and nonexcludable.

If the marginal damage caused by a certain type of pollution is $100 billion and the marginal cost of abatement is $180 billion, then:

society would be better off if emissions were increased.

If air pollution comes from multiple sources and it causes many people to suffer, then an efficient agreement among the parties is difficult to achieve because:

transaction costs are high