Econ ch 9

They know that each time they raise the temperature in the apartment by 1​ degree, their heating bill goes up by ​$32.

2 degrees

You are the County Commissioner of Hazard County. Jeb brings a complaint before you that​ Dwight's hog farm is creating a terrible odor. Your first instinct is to tell the neighbors to work it out among themselves. The _______ ________ provides theoretical support for private bargaining as an effective approach to _________ ___ ________ According to this theoretical​ principle, ____ _____ will only work as a solution if Jeb ____ have a right to clean air. You are about to recommend that Jeb and Dwight engage in private bargaining to deal with the externality when twenty of​ Dwight's neighbors also complain that they​ don't like the smell. Private bargaining is ___ likely to be successful the more parties involved because of _________ ____________ _________

Coase Theorem internalize the externality Private bargaining does Less increased transaction costs

Which of the following is common between corrective taxes and corrective​ subsidies? ​(Check all that​ apply.)

It exactly aligns private and​ society's incentives. It provides a greater incentive to deal with the externality problem rather than the​ command-and-control approach.

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

Which method is not a recommended approach supported by externality theory to deal with this​ problem?

Nonprofit intervention.

Which of the following best illustrates the tragedy of the​ commons?

Overfishing in public waters.

Which of the following is not an example of when the free market fails to generate maximum social​ surplus?

Private good

​a). Health insurance is a ___ ____ ​b). Radio spectrum is a ____ ____ ____ ​c). A video on YouTube is a ___ ____ ​d). A mosquito control program in a city is a ___ _____ ​e). A​ library's collection of​ e-books is a ___ ____

Private good common pool resource Public good Public good club good

In which of the following situations can an externality be internalized by using the Pigouvian​ subsidy? ​(Check all that​ apply.)

Sophia's flower garden provides a pleasant view for her neighbors. An orchard is placed next to a beehive.​ So, both the farmer and the beekeeper benefit from each other.

It is given that the marginal social benefit​ (MSB) of a particular positive externality equals​ $500. Which of the following statements is true if this externality is to be​ internalized?

The Pigouvian subsidy equals​ $500 and the difference between the demand curve and the MSB curve equals​ $500.

_____ is maximized when firms produce at equilibrium in a free market.

Total surplus

You decide to respond to the​ neighbor's complaints by limiting the number of hogs that Dwight can have on his farm. This is an example of using a _________

command-and-control approach.

The tragedy of the commons results when​ ___________.

common pool resources are overused.

If you were to recommend a​ command-and-control approach, a disadvantage would be that it​ ___________.

creates few incentives for innovation.

By introducing Pigouvian​ subsidies, the government can ______ the equilibrium quantity towards the socially optimal level.

increase

Negative externalities cause a ____ shift of the supply curve and ____ in market quantity. Recognizing this deadweight loss ____ result in elimination of the externality.

leftward a decrease will not

You have just been appointed as the County Commissioner of Hazard County. You realize that you should learn some economic concepts that will be useful to you in your new job. In a free​ market, efficient firms will produce where _____ equals _____ .

marginal cost marginal revenue

You are the County Commissioner of Hazard County. Jeb brings a complaint before you that​ Dwight's hog farm is creating a terrible odor. The noxious odor from​ Dwight's hog farm is a ______

negative externality

If this externality from​ Dwight's farm is left​ unaddressed, then Dwight will continue to ______ in regards to the social surplus optimum

overproduce

You are the County Commissioner of Hazard County.​ Dwight's neighbors bring a complaint before you that​ Dwight's hog farm is creating a terrible​ odor, and they are demanding government action. Which of the following is not a course of action that you could take to satisfy the​ neighbor's demands?

private bargaining

Why is it difficult for the market to deliver socially efficient quantities of goods like clean air or street​ lighting? These are examples of ___ ___ ​therefore, even if you ___ ___ ___ for the good you still __ ___ ____ __

public goods do not pay get to enjoy it

Positive externalities result in a ____ shift of the _____ curve. There ___ a deadweight loss with a positive externality.

rightward demand is

When bargaining to deal with negative externalities

the cost falls on the party with the most to gain.

The Pigouvian subsidy creates a ____ ___ _____ that is identical to the MSB curve by having individuals consider the externality when making their choices.

virtual demand curve