CH. 9 Econ
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
