Chapter 10 & 11 Econ 201

The government auctions off 500 units of pollution rights. They sell for $50 per unit, raising total revenue of $25,000. This policy is equivalent to a corrective tax of _____ per unit of pollution.

$50

Economists argue that appropriate corrective taxes or tradable pollution rights will result in efficient pollution reduction. Which of the following statements supports this claim? Check all that apply.

Corrective taxes or tradable pollution rights give firms greater incentives to reduce pollution. The government does not have to figure out which firms can reduce pollution the most.

Which of the following is an example of a positive externality?

Hillary's newly cut lawn makes her neighborhood more attractive.

Ringo loves playing rock 'n' roll music at high volume. Luciano loves opera and hates rock 'n' roll. Unfortunately, they are next-door neighbors in an apartment building with paper-thin walls. In this case, ___________ imposes a_______________ externality on his neighbor in the form of noise pollution. What command-and-control policy might the landlord impose? Suppose the landlord lets the tenants do whatever they want. According to the Coase theorem, which of the following are true about Ringo and Luciano reaching an efficient outcome on their own? Check all that apply.

Ringo negative A rule that music could not be played above a certain decibel level They might not be able to reach an agreement if the transaction costs are high. Ringo and Luciano may negotiate an agreement if bargaining is successful and neither holds out for a better deal

Which of the following policies has the United States adopted in response to this problem? Check all that apply. It is often argued that this policy increases the technological capability of American producers relative to that of foreign firms. This is true only if the knowledge provided by basic research is________

Subsidizing research through the National Institutes of Health excludable

Many observers believe that the levels of pollution in our society are too high. If society wishes to reduce overall pollution by a certain amount, which of the following reasons supports why it's efficient to have different amounts of reduction at different firms? Check all that apply.

The costs of reducing pollution differ across firms

There is often litter along highways but rarely in people's yards. Which of the following statements supports this observation? Check all that apply.

When a person litters along a highway, others bear the negative externality of having to clean it up. Littering in your own yard imposes costs to you, so you are less likely to do it.

Many transportation systems, such as the Washington, D.C. Metro (subway), charge higher fares during rush hours than during the rest of the day. Which of the following statements supports this observation? Check all that apply.

When the system is congested, each additional rider imposes costs on other riders. Increasing the fare during rush hour discourages people from using the subway at this time

If the production of a good yields a negative externality, then the social-cost curve lies ________ the supply curve, and the socially optimal quantity is ________ than the equilibrium quantity.

above,less

Private security patrol with idle officers Snow plowing of public streets immediately after a heavy snowfall Education in a congested classroom Rural roads Congested city streets

club good common resource private good public good common resource

Suppose that the government decides to issue tradable permits for a certain form of pollution. In terms of economic efficiency in the market for pollution, it__________ matter whether the government distributes the permits or auctions them off. If the government chooses to distribute the permits, the allocation of permits among firms matters for efficiency.

does not false

Which of the following is an example of a common resource?

fish in the ocean

Charlie loves watching Downton Abbey on his local public TV station, but he never sends any money to support the station during its fundraising drives. Economists would call Charlie a Which of the following describes how the government can solve the problem caused by people like Charlie? Which of the following statements are true about the private market in this case? Check all that apply.

free rider The government can sponsor the show and pay for it with tax revenue collected from everyone. The existence of cable TV makes the good excludable and thus no longer a public good. The private market could solve the problem by making people watch commercials that are incorporated into the program.

When the government levies a tax on a good equal to the external cost associated with the good's production, it ________ the price paid by consumers and makes the market outcome ________ efficient.

increase,more

Which of the following is an example of a public good?

national defense

Consider two ways to protect your car from theft. The Club (a steering wheel lock) makes it difficult for a car thief to take your car. Lojack (a tracking system) makes it easier for the police to catch the car thief who has stolen it. If a car thief encounters a car with the Club and a car without it, the car with the Club imposes a____________ externality on the car without the Club. A policy implication from this result includes a_________ those who use the Club.

negative tax on

Some economists argue that private firms will not undertake the efficient amount of basic scientific research. Because general knowledge is________________and_____________ , it is a____________ . This means the benefits of basic scientific research_____________ available to many people. The private firm___________ this into account when choosing how much research to undertake.

not excludable not rival in consumption public good are doesn't take

Wireless, high-speed Internet is provided for free in the airport of the city of Communityville. At first, only a few people use the service. In this case, the service is__________ and_______ therefore it is a______ Eventually, as more people find out about the service and start using it, the speed of the connection begins to fall. Now the service is a overuse is likely to occur

not excludable not rival in consumption public good common resource true

Common resources are....

overused in the absence of government

Both public goods and common resources involve externalities. The externalities associated with public goods are generally__________ . Because of this, the free-market quantity of public goods is generally___________than the efficient quantity. The externalities associated with common resources are generally_________ . Because of this, the free-market quantity of common resources is generallyg__________ than the efficient quantity.

postive less negative greater

If a car thief encounters two cars without the Club, but the car thief fears a Lojack system might be installed in one of the cars, the car with the Lojack system imposes a______________ externality on the other car. A policy implication from this result includes a______________ those who use the Lojack technology.

postivie subsidy for

Which categories of goods are excludable?

private and club goods

Which categories of goods are rival in consumption?

private goods and common resources

Which of the following statements about corrective taxes is not true?

they cause deadweight losses

The Coase theorem does not apply if

transaction costs make negotiating difficult.

Public goods are

underprovided in the absence of government.