HW 13

For the 50th unit of pollution removal, A) the marginal cost exceeds the marginal benefit. B) the marginal benefit exceeds the marginal cost.

A) the marginal cost exceeds the marginal benefit.

Private costs are costs that the firm is not obligated to disclose to the public.

False

The terms "social cost" and "external cost" are synonyms.

False

Wages are an example of an external cost.

False

When the production of a good results in pollution, private and social costs are the same.

False

A marketable permit provides its owner with the right to pollute a specified amount. The number of permits in existence is determined by ___ allowed to purchase permits.

regulators. Anyone is

a student choosing between his two favorite pizza spots for lunch

not an example of asymmetric information

The residents of the apartment complexes pay Mu Epsilon Nu not to have loud parties.

private solution to an externality

a Chipotle burrito:

rivalrous and excludable

Command and control is always the best option when it comes to reducing the amount of pollution.

False

Command and control is more flexible than market‑based regulation.

False

For the 20th unit of pollution removal, A) the marginal benefit exceeds the marginal cost. B) the marginal cost exceeds the marginal benefit.

A) the marginal benefit exceeds the marginal cost.

Suppose that Timmy lives in a neighborhood where graffiti is common. People's cars and the sides of houses are often vandalized with graffiti. In response to the vandalism, the people in the neighborhood have proposed a voluntary community fund to pay for extra police patrols. There are 1000 people in Timmy's neighborhood, and each is recommended to contribute $10 a month. Timmy's car has recently been vandalized and he is concerned it may happen again. Although he believes that he will benefit from the extra police patrols, Timmy has decided to take a free‑rider approach. Given his thinking, how much will Timmy contribute to the fund? Timmy's contribution: $

0

When a pollution charge of $5 per unit emitted is imposed, how many units of pollution will the firm choose to clean up? units of pollution cleaned up:

0

When a pollution tax of $20 per unit emitted is imposed, how many units of pollution will the firm choose to clean up? units of pollution cleaned up:

40

What is the socially optimal quantity of pollution emissions? optimal pollution emissions: ____ tons

45

Determine the socially optimal level of pollution removal. socially optimal pollution removal:___ units

46.23

Assume that the entire neighborhood has the same mentality as Timmy. What will occur? A) No one will contribute to the community fund, resulting in no changes. B) Everyone will contribute money towards the community fund, yielding higher rates of police patrol and less graffiti. C) None of the choices are correct. D) The rate of graffiti in the neighborhood will increase significantly.

A) No one will contribute to the community fund, resulting in no changes.

Select the best definition of a public good. A) a good that is nonexcludable and nonrival in consumption B) a good that is excludable and nonrival in consumption C) a good that is paid for by public funds D) a good that is excludable and rival in consumption E) a good that is nonexcludable and rival in consumption

A) a good that is nonexcludable and nonrival in consumption

Will a market economy, without any government intervention, produce the socially optimal quantity of pollution emissions? A) No, it will produce less pollution emissions. B) No, it will produce more pollution emissions. C) Yes, it will produce the socially optimal quantity of pollution emissions.

B) No, it will produce more pollution emissions.

The net effect of a negative externality decreases A) only producer surplus. B) both producer and consumer surpluses. C) only consumer surplus. D) the deadweight loss.

B) both producer and consumer surpluses.

Which statement best illustrates a cause of government failure as it relates to economics and markets? A) cessation of government business due to lack of funding B) when the incentives of government officials do not allign with public interest C) the situation in which rebels overtake an established government E) a failure of governments to meet budgetary needs

B) when the incentives of government officials do not allign with public interest

Does there appear to be an externality associated with tire production? A) yes,a positive externality B) yes,a negative externality C) no

B) yes,a negative externality

For the 87th unit of pollution emissions, the MAC is A) equal to the MDC. B) greater than the MDC. C) less than the MDC.

C) less than the MDC.

Aurora Township is asking all of its citizens to chip in and donate money to build a new library. Tommy thinks he already pays enough money in taxes, so he chooses not to donate. He knows that even if he does not contribute he will be able to use the library once it is built. This is an example of A) adverse selection. B) tragedy of the commons. C) the free rider problem. D) asymmetric information. E) moral hazard.

C) the free rider problem.

Ronald Coase's ideas on property rights have helped economists and policymakers better understand environmental problems. Identify the true statement regarding Coase and property rights. A) Property right allocation is unimportant because the affected parties will contract with one another to find an efficient solution to externality problems regardless of who is assigned the initial property right. B) Property rights refer exclusively to ownership of land. C) Environmental harms will be greater when property rights are assigned to firms. D) The assignment of property rights to someone is essential.

D) The assignment of property rights to someone is essential.

Which scenario is the best example of the "tragedy of the commons?" A) All artists in a mass-media environment face an incentive to create works that are lower quality in order to appeal to the lowest common denominator. B) Two countries engaged in international trade of a good reach the same equilibrium price, which is higher than it would have been in the absence of trade. C) A group of farmers forms a collective to coordinate a common pricing strategy. D) Users of a shared shower in a dorm allow the shower to get nasty by failing to clean it often enough. E) A country experiences widening income inequality.

D) Users of a shared shower in a dorm allow the shower to get nasty by failing to clean it often enough.

Specialized electronic batteries, such as those for laptops, are hard to dispose of safely, yielding excess pollution when one gets thrown away. Suppose that producing these batteries creates an external cost of $150 per unit. The accompanying diagram depicts the market for these batteries in which these external costs are not internalized. Please adjust the appropriate curves to represent the market if the external costs are internalized.

Supply curve over one to the left

A limitation of a command and control is that firms have no incentive to remove additional pollution once they are within the legal pollution limits.

True

Command and control is subject to political considerations.

True

One option with command and control is for the government to decide on a specific amount of pollution that firms can legally emit.

True

Pollution is an example of an external cost.

True

Social cost is the sum of private and external costs.

True

Under command and control, the government has the option to specify the technology that firms must use in production.

True

When the production of a good results in pollution, private and social costs are different.

True

A factory emits pollution into the atmosphere as a by-product of production.

an example of a negative externality

A neighbor plays loud music that annoys the surrounding community.

an example of a negative externality

a firm hiring a new employee from a list of candidates who responded to a posting on Monster.com

an example of asymmetric information

a firm selling car insurance

an example of asymmetric information

a person purchasing a used Hyundai Sonata

an example of asymmetric information

a firm that is going to promote one of two internal candidates for a management position

not an example of asymmetric information

Suppose Jeremy, Francis, and Andrew are part of Mu Epsilon Nu, a college fraternity known for its very loud, rambunctious weekend parties. The parties annoy many of the residents in nearby apartment complexes due to the loud music and blaring neon lights. This is an example of an ____

external cost

Compared with no regulation, regulation with marketable permits decreases firms' costs

false

Environmental standards are typically more efficient than emissions taxes.

false

Firms generate the same level of pollution, regardless of any emissions taxes that are imposed

false

Pollution taxes are more effective at reducing pollution than marketable permits

false

With an emissions tax, firms must pay a fine if they pollute more than the legally specified amount

false

The socially efficient number of tires is ___ the number of tires produced at the private market equilibrium.

lower than

The local city government sends the police to break up the parties.

non-private solution to an externality

playing World of Warcraft, a massive multiplayer online computer game:

nonrivalrous and excludable

street lighting in a public park:

nonrivalrous and nonexcludable

A donut shop emits a delicious smell into the air as a by-product of production.

not an example of a negative externality

A person gets a flu shot and is therefore less likely to spread illness to others.

not an example of a negative externality

A person with no allergies gets a mosquito bite from a disease-free mosquito.

not an example of a negative externality

a person buying a new Toyota Camry

not an example of asymmetric information

The fraternity pays the local community to compensate for the noise pollution.

private solution to an externality

wild tuna in the Pacific Ocean (assume no permit is required):

rivalrous and nonexcludable

A negative externality exists when ____ exceed ___

social costs : private costs

According to the Coase theorem, private parties can negotiate to an efficient solution in the presence of externalities if the ____ is (are) relatively low.

transaction costs

An emissions tax is a type of Pigouvian tax

true

Emissions taxes encourage firms to find innovative ways to remove pollution

true

Marketable permits provide their owners with the right to pollute a specified amount

true

Marketable permits typically achieve pollution reduction at a lower cost than command‑and‑control regulation

true

The term "cap and trade" describes regulation by marketable permits

true

At a price of $100, 90 tires/day are demanded. At this price, society will be ____ compared to its situation when the producer is required to account for the pollution costs.

worse off