Exam 4 modules 11 and 13

What is a pollution charge?

A type of tax that is levied on the quantity of pollution that a firm emits.

The government allows sulphur dioxide emissions of 4 parts per billion and has a tradable permits program. The 2 firms in the market pollute at a rate of 5 parts per billion and 6 parts per billion respectively. The 2 firms have the following costs to reduce emissions.

$325,000.

Which of the following are examples of economic activities with negative externalities?

A gold mine discharging arsenic into a natural lake.

Which of these examples show market failure because of the difference between private costs and social costs?

A paper making firm clear cuts large swaths of forest land and diminishes wildlife habitats, which impacts hunting activities.

Governmental public policies have the potential to create a series of programs to assist people to transform the ________ under which they live.

circumstances

Goods that are nonexcludable and rivalrous are called

common goods.

If pollutants are emitted into the air and water, what external costs might be incurred as a result?

compromised recreation possibilities for citizens.

Which countries will need to strike some balance between economic output and environmental quality as a prominent climate-change priority?

every country

Common goods tend to be

exploited and poorly managed because the lack of clear property rights removes incentives to efficiently manage the goods.

Ella lives in Flint, Michigan where the city water was contaminated with harmful chemicals and lead. Ella's infant now suffers from mental retardation due to lead poisoning. This is an example of a/an

external cost for Ella and her family because they bear some cost derived from the water distribution activity.

Market failure describes a situation in which the market itself

fails to allocate resources efficiently

A source of income inequality is ________.

family structure

The allocation of income among members of society whether it is seen as equitable or inequitable, is called ________.

income distribution

Which of the following is a nonexcludable product?

radio broadcasting

The U.S. Government has a variety of policies that enable inventors to ________, such as the granting of patents and ________.

receive an increased rate of return; subsidization of research and development.

A likely outcome from taxing the rich at a high percentage in order to ________ income, would be discouraged entrepreneurship and work. Responses

redistribute

The assistance programs from the government that provide assistance to the near-poor and the poor are collectively known as the ________.

safety net

Traditionally, policies for environmental protection in the U.S. have focused on ________ pollutant could be emitted. Responses

setting limits for how much of each

A total benefit, including all private benefits from producing or consuming a good or a service plus any external benefits of production or consumption, is the ________.

social benefit

Externalities exist when/ what is the environment in which externalities exist

social costs are different from private costs.

Markets are inefficient when

social costs are different from private costs.

Tradable pollution permits can lower the cost of reducing pollution because

some firms can reduce pollution at a lower cost than others.

The laws associated with command-and-control regulations

specify allowable quantities of pollution.

Government policies, in addition to patent protection, can spur innovation that includes

tax breaks for companies that invest in research and development.

A town releases 16 million gallons of raw sewage into a nearby large body of water. The table below shows the total costs of cleaning up the sewage to different levels, together with the total benefits of doing so. (Benefits include environmental, recreational, health, and industrial benefits.) Using the information in the table, calculate the marginal costs and marginal benefits of reducing sewage emissions for this town. What is the optimal level of sewage for this town?

4 million gallons

Technological innovations

can create positive externalities and benefit more than the innovators.

What happens with poverty and inequality if high-income and low-income workers have rising incomes, but the incomes increase less for workers who are high-income earners?

Both inequality and poverty will decre

What is a benefit of environmental protection and one of the costs of it?

Citizens with better health and higher cost for businesses.

What is meant by externalities?

Costs or benefits received by third parties from the market's production activities.

What does a Lorenz curve graph? Responses

Cumulative shares of income received by everyone up to a particular quintile.

A number of different government policies can increase the incentive to innovate. Which of the following is the best example of a government policy incentive?

Government assistance with the costs of research and development.

To what do market externalities lead?

Greater inefficiency in the market as it ignores the benefits or costs which encroach on third parties through activity in that market.

What are some of the causes of the poverty trap? Responses

In the long run, working provides little financial gain.

If the regulations for environmental protection were strictly adhered to and industries, cities, and individuals considered the environment crucial for survival and a thriving market, what would be the benefits from this change?

People would be healthier and probably live longer.

Which of the following statements about public goods is true?

Public goods tend to be difficult for private firms to produce profitably because of the large number of potential free riders.

BigManufacture Inc currently releases lead in to the local waterways at a concentration of 5 parts per billion. The government regulations sets a limit to the lead pollution at 2 parts per billion accompanied by a $30,000 fine per year for each part per billion beyond the 2 part limit. What is BigManufacture Inc likely to do?

Reduce lead pollution by 2 parts per billion.

BigManufacture Inc currently releases lead into the local waterways at a concentration of 5 parts per billion. The government regulations sets a limit to the lead pollution at 3 parts per billion accompanied by a $35,000 fine per year for each part per billion beyond the 3 part limit. What is BigManufacture Inc. likely to do?

Reduce lead pollution by 2 parts per billion.

What are the benefits of clearly established property rights?

Responsible parties are identified and it helps reduce negative externalities.

Which of these types of government actions would aggravate a poverty trap?

Set a timed deadline to cut off assistance at a certain date whether extra work or income has been achieved or not.

The cost of reducing sulphur dioxide emissions are shown in the table below for BigChem Inc and SmallChem Inc. The government mandates a reduction of sulphur dioxide of 1 part per billion overall. Based in the cost faced by the 2 firms in the market; assuming that they could trade pollution permit, what would be the most efficient outcome?

SmallChem Inc reduces emission by 2 parts per billion and BigChem Inc purchases the right to pollute for $75,000 or more.

Which of the federal government programs gives a set money amount to every state?

TANF

Which following example is about a command-and-control policy?

The EPA sets national standards for air quality.

Identify the following examples of command-and-control regulation?

The U.S. government passes a law that imposes penalties on manufacturing industries whose chemicals exceed allowed levels in water samples.

Imagine an economy of 10 individuals. Their annual incomes are reported below. Imagine that $100 of Oprah's income is transferred to Anna. What is true?

The poorest 20% of the population's income share grows from about 5.0% to about 6.8%.

What will most reasonably happen if a large number of individuals choose to be free riders in a city?

The city may never provide public goods.

Take the example of a U.S. chemical company in an unregulated market. When planning out its operating strategies, the company does not included in the plan the external costs of the company pollution that will be added to the environment. Why would this business not strategize about the external costs?

The company has no fiscal requirement to clean up its pollution.

Which of the following determinants are used to define the poverty line?

The cost of basic housing

Which of the following are NOT examples of market-based policies?

The federal government requires domestic auto companies to improve car emissions.

There is a large park which is owned by the local city government with a food forest containing many fruit and nut trees. What will most likely happen to that food forest?

The food forest will be over-harvested.

The goals of market oriented pollution control policies are

The goals of market oriented pollution control policies are

The city of Brandberry has planned to reduce the arsenic in its water by 1 part per billion each year over the next 7 years. What do you expect will happen?

The marginal cost will be the highest and marginal benefits the lowest in year seven.

What is a reason pollution tax results in a pollution level that is socially efficient?

The pollution tax makes the polluter account for the external costs of their actions.

Which of the following accurately describes government food stamps?

There are time limits which are not completely a work hindrance.

What typically happens with common goods?

They are usually poorly managed and overused because property rights lack clarity and removes incentives for efficient management of the goods.

Suppose a government starts to phase out its antipoverty program payments more slowly in order for the near-poor to reach self-sufficiency. What would one of the criticisms be about this policy?

This antipoverty program costs the government more money.

Which of the following is a potential source of income inequality?

Wage disparity

Which of the following are examples of positive externalities?

You are a bird watcher, and your neighbor puts up birdhouses and gardens to attract birds.

Which of the following are examples of negative externalities?

Your neighbor adds a floor to his house and blocks your view of the lake and reduces the value of your property.

If a market situation arises where the externality is so dangerous in even small quantities, which of the following strategies would be the most efficient?

a government controlled effluent standard

Which of the following describes a situation in which a third party, outside the transaction, suffers from a market transaction?

a negative externality

When anti-poverty programs from the government have declining benefits as people earn higher incomes, this has the possibility of leading to ________.

a poverty trap

While the traditional approach of U.S. government policies for environmental protection has had some level of success, some economists propose

a range of more flexible, market-oriented pollution-control policies.

Using the term "spillover" is a less formal means of describing

an externality.

The social benefits from education

are higher than the private benefits and therefore education leads to positive externalities.

A positive externality arises when a third party, outside the market transaction, ________.

benefits from a market transaction

Mollie Orshansky officially defined the poverty line in the U.S. based on the ________.

cost of a healthy diet

Government policies that can spur innovation, in addition to patent protection, include

direct government investment in research and development.

Many residents of a particular town enjoy taking their dogs with them when they go to their local park for recreation and picnics. Everybody enjoys the park more when each group cleans up after themselves and their pets, but nobody enjoys the act of cleaning up after themselves or their dogs. In this situation, we can expect the park to be ________, due to a ________.

dirty; prisoner's dilemma

An individual who wants others to pay for public goods, but plans to use those goods without paying for them, is referred to as a ________.

free rider

When going over the arguments opposed to government intervention, one states that society must accept a ________ degree of inequality in exchange for if it wishes to have a ________ level of economic output.

high; higher

Some of the benefits of clean air and water regulations are

higher property values and healthier population.

Which of the following is the best example of a nonrivalrous product?

highways

If 20% of the population earns 50% of the total income in a country, then there is ________.

inequality

The effects of a poverty trap can be reduced by ________.

initially decreasing the government payments by smaller amounts

When a publicly available good becomes depleted through people acting in their own self-interest, Responses

it is the tragedy of the commons.

When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is ________.

nonexcludable

For a good to be classified as ________, one person's use of the good should not prevent others from using it at the same time.

nonrivalrous

Which of the following are examples of how patents are not always a perfect way to encourage innovation: Responses

not every new idea can be protected with a patent or copyright.

When the social benefit of producing a good is higher than the private benefit, then

positive externalities exist.

When negative externalities are present in a market (assuming no government intervention), then

the equilibrium in the market will be inefficient because the supply curve is based on private cost only and does not include external costs.

The more one reduces pollution, Responses

the higher the marginal cost.

The poverty line is determined by ________.

the level of income needed to cover basic needs

The optimum level of pollution in a market would be

the level of pollution where the marginal cost and benefit of reducing pollution are equal.

If pollution exists in a market,

the supply curve would be shifted farther to the right than optimal because the costs of the pollution are not included.

If incomes rise for both low-income and high-income workers, but rise less for the high-income workers,

then poverty will fall and inequality will fall.

If a rise in incomes for both low-income and high-income workers is higher for the high-income workers,

then poverty will fall and inequality will rise

Take the scenario where there are only a small number of business in a market and each of the have a different production process and cost structures. What pollution reducing strategy would fit this market most efficiently

tradable permits.

A Lorenz curve represents the cumulative percentage of total income received along the ________ and the cumulative share of population along the ________.

vertical axis; horizontal axis

A Lorenz curve graphic shows

what perfect equality of the income distribution looks like compared to the actual income distribution.

Zero pollution

would not be efficient because the cost of achieving zero pollution would be greater than the benefits of it.