econ 202 problem set 8

the public choice model

applies economic analysis to government decision making

hiking in a large park (no congestion) surrounded by a fence

a quasi public good

by market failure, the author means

a situation in which the market fails to produce the efficient level of output

a pigovian tax is

a tax to bring about an efficient level of output in the presence of externalities

which of the following is not an example of rent-seeking behavior?

engaging in aggressive advertising that slams a competitor's product

barneys friends are

free riders because they benefit from watching sunday games without paying for them

your neighbor john has a barking dog. which of the following statements is true?

it can create negative externalities by disrupting your sleep and can create positive externalities by discouraging intruders

The public choice model raises questions about the​ government's ability to regulate economic activity efficiently. Which of the following statements represents the views of most economists with regard to the role of​ government?

Agencies such as the Food and Drug Administration and the Environmental Protection Agency can serve a useful purpose, but we need to take the costs of regulation into account along with the benefits.

when are we likely to see private solutions to the problem of externalities?

all of the above- when the parties involved have information about the externality, when transaction costs are low, and when the number of parties involved is small

which of the following best describes the process of regulatory capture?

bank of america

jeff and james made the response they would

be free riders because they would still receive the same amount of protection as everyone else whether or not they pay

why is a typical person likely to gather more info when buying a new car than when voting for a member of Congress?

because buying a new car affects the person more immediately and personally compared to voting for a member of congress. in the latter, a person's vote is only one of many voters and therefore, not likely to have a large impact on the outcome

what is free riding?

benefiting from a good without paying for it

what are the sources of externalities and market failure?

both a and b: the difficulty of enforcing property rights in certain countries and incomplete property rights.

the parties involved in an externality have an incentive to reach an efficient solution because

both parties become better off when an efficient solution is reached

education in a public school (grades K through 12):

common resource

companies that produce toilet paper bleach the paper to make it white. some paper plants discharge the bleach into rivers and lakes, causing substantial environmental damage. suppose the graph to the right illustrates the situation is the toilet paper market. by imposing a tax on toilet paper, the government will cause

consumers to internalize the externality causing the equilibrium quantity of toilet paper consumed to decrease. The value of the tax should be $50 per thousand ton of toilet paper

farmer owens has an apple orchard that must be pollinated by bees in order to bear fruit. farmer owen's neighbor, Maude, owns beehives with bees that can pollinate the apple trees. suppose the benefit of the bees to Farmer Owens is $5000 per year. suppose the bees provide no benefit to Maude but she must pay $4000 per year to maintain the hives. If farmer owens and Maude engage in Coase bargaining, what would likely result?

farmer owens would pay Maude between $4000 and $5000 to maintain the hives

in particular, the author describes inefficient land allocation as a market failure because the market results in a quantity of land to be used for urban development that is ____ than the efficient level.

greater

jess practices her electronic keyboard every evening for an upcoming musical concert. The sound disturbs Felix, who usually works on his college assignments around the same time. the value of the practice to jess is $100, while the cost of the practice to Felix is $80. According to George, a student of economics, Jess should pay felix $80 to continue her practice for the musical concert. Which of the following assumptions is being made by George?

he assumes that felix has the right to quiet studying conditions

the coase theorem states that

if transaction costs are low, private bargaining will result in an efficient solution to the problem of externalities

an individual producer or a consumer "internalizes an externality" when

in their own decisions they take into account the external effects of their actions

The public choice model can be used to examine voting models that contrast the manner in which collective decisions are made by governments​ (state, local, and​ federal) and the manner in which individual choices are made in markets. Which of the following descriptions is consistent with the difference between collective decision−making and decision−making in​ markets?

individuals are less likely to see their preferences represented in the outcomes of government policies than in the outcomes of market

the same article notes that " rent seeking is a very useful concept to have"...... rent seeking is

lobbying or bribing politicians to gain favorable legislation or regulations

are policymakers susceptible to rent-seeking behavior? explain. rent seeking behavior

may succeed when policymakers engage in logrolling

public choice theory helps us to understand how government could fail systematically because it recognizes that policymakers are

no different than consumers or managers of firms and are likely to pursue their own self-interest, even if their self-interest conflicts with the public interest

a. Considering that Barney can watch any football game broadcast on​ Sundays, including those games not shown on his local television​ stations, he is

not a free rider because barney pays for the program package

in this context, government failure means

politicians making bad decisions for their own selfish reason

every year at the beginning of the flu season, many people, including the elderly, get a flu shot to reduce their chances of contracting the flu. one result is that people who do not get a flu shot are less likely to contract the flue. getting a flu shot results in a _____ externality.

positive

an apple

private good

education in a private school (grades K through 12):

private good

mail delivery

private good

a television broadcast of the world series

public good

hiking in a large park (no congestion) not surrounded by a fence

public good

rent seeking can be useful in understanding why government policies

sometimes produce results that are inefficient and harmful to the people

at what level must a pigovian tax be set to achieve efficiency? a pigovian tax must be set equal to

the cost of the externality

what is the focus of a command-and-control approach to reducing pollution?

the government imposing quantitative limits on the amount on the amount of pollution firms are allowed to generate

The advanced machinery used for limestone quarrying in a particular region leads to noise pollution and affects the hearing ability of people residing in the neighborhood. The quarrying activity also results in soil erosion. According to an environmental research​ group, the market price and output of limestone in this region is much higher than the socially efficient​ level, as the limestone producers do not include the social cost of production in their output decision. The group formally requests the government to impose a tax on limestone production to internalize the externality. Suppose the government responds by imposing a tax on the production of limestone. After the tax is​ imposed, total production of limestone declines by the amount the environmental research group had estimated. This convinces them that limestone production is now socially efficient. Which of the following conclusions can most reasonably be drawn from the given​ information?

the marginal private cost of producing limestone at this quarry is now equal to the marginal social cost as estimated by the research group

the author suggest the market for converting land to urban uses results in "inefficient land use allocation" because

the marginal social cost of converting land to urban uses is greater than the marginal private cost

how is free riding related to the tendency of a public good to create market failure? Free riding results in

the market producing a quantity of public goods that is inefficiently low because they are non excludable

one important difference between the political process and the market process is that

the political process results in collective actions in which everyone is obliged to participate while in the market process individuals are free to participate or not

examples of transaction costs include:

the time required to negotiate an agreement, the cost of drafting a contract or agreement, and the cost of monitoring an agreement.

the village elders were trying to prevent the economic problem of

the tragedy of the commons

a producer or a consumer will internalize an externality because

they have an incentive to consider the external effects of their actions due to taxes that are imposed or subsidies that they receive

rent seeking is an attempt to

use the government for individual benefits at the expense of others. regulatory capture is an example of this, where a regulatory agency makes decisions benefitting the firm being regulated

the solution of the village elders to outcast those who committed the breach of trust by fishing in the pond when it was forbidden is an example of

using community norms to solve the problem. the solution would most likely be effective because it was used in a small community