Quiz 16: Externalities
The proposition that if bargaining is costless, the market can achieve an efficient outcome is the:
Coase theorem
If external costs exist, the competitive free market:
allocates resources inefficiently.
The marginal social benefit of pollution:
can be measured as the additional gain to society from one additional unit of pollution.
The marginal benefit of pollution emissions ____ as the quantity of pollution emissions ____.
decreases; increases
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 negative externality:
is an uncompensated cost imposed by an individual firm on others
An industry with production that generates external costs produces a quantity of output that is:
larger than the social optimal quantity
External benefits are associated with the production of batteries . Without government regulation, the market will:
price batteries at less than the marginal social benefit.
As the quantity of pollution rises, its marginal social cost:
rises
Taxes are a more effective method of controlling pollution than environmental standards because:
taxes encourage reducing pollution at the lowest possible cost.
Automobile emissions generate pollution, have costs, and cause discomfort to residents of a city. In this case:
the externality can be internalized by imposing a specific tax on drivers.
The efficient quantity of pollution emissions occurs where:
the marginal social benefit of pollution is equal to the marginal social cost of pollution
The additional cost imposed on society as a whole by an additional unit of pollution is:
the marginal social cost of pollution
The socially optimal quantity of pollution is:
the quantity whose marginal social cost is equal to the marginal social benefit
If government officials set an emissions tax too high:
there will be too little pollution.
When individuals take external costs and benefits into account:
they internalize the externality.
An advantage of tradable emissions permits is that:
they provide incentives for firms to develop technologies that are less polluting.
A copper mining operation discharges waste products into a river and causes higher costs and discomfort to downstream users of the water for which they are not compensated. In this case:
too much of society's resources is being used to produce copper.
A market economy will produce ______ without any government regulation
too much pollution
The licenses that are exchangeable and that enable the holder to pollute up to a specified amount during a given period are called:
tradable emissions permits.