Final Negative Externalities

The graph shows marginal social cost and marginal private cost curves. What is the marginal external cost?

$2

A cost imposed on bystanders is _____ cost.

an external

The graph shows the marginal social cost, demand, and supply curves in the toothpaste market. What is the socially optimal quantity and price in this market?

eight; $4

The graph shows the marginal social cost, marginal private cost, and demand curves in the aux cable market. If the government uses a quota to control an externality in this market, what quantity would be chosen as a limit on sales?

four

The graph shows the marginal social cost, demand, and supply curves in the shower gel market. In this market, the socially optimal output is _____, and the market-determined output is _____.

four; six

The supply curve of a firm is also its _____ cost curve.

marginal private

All marginal costs, no matter who pays them, are marginal _____ costs.

social

The graph shows the marginal social cost, demand, and supply curves in the cinnamon roll market. A corrective tax of _____ per unit will move the cinnamon roll market to the socially optimal output of _____ units.

$2; 8

The graph shows the marginal social cost, demand, and supply curves in the cinnamon roll market. A corrective tax of _____ per unit will move the cinnamon roll market to the socially optimal output of _____ units.

$4; 4

The graph shows the marginal social cost, demand, and supply curves in the toothpaste market. If market forces prevail, this market will produce and sell _____ tubes of toothpaste at a price of _____.

12; $3

The graph shows the marginal social cost, demand, and supply curves in the jigsaw puzzle market. What are the socially optimal quantity and price in this market?

4; $8

The graph shows the marginal social cost, demand, and supply curves in the jigsaw puzzle market. If market forces prevail, this market will produce and sell _____ units of output at a price of _____. Correct!

6; $6

The graph shows the marginal social cost, supply, and demand curves in the hand sanitizer market. At what quantity could the government set a quota to control this externality?

8

The efficient rate of emissions occurs when:

MSB = MSC .

An externality is defined as:

a side-effect of an activity that affects bystanders whose interests are not taken into account.

One of the main problems with the Coase theorem is that:

bargaining costs are generally not low (or zero).

From a community perspective, the marginal cost that matters is the marginal _____ cost.

social

Emissions from large pulp and paper factories create health risks for pedestrians and discomfort for residents of the city of Ashdown, Arkansas. In this case:

the externality can be solved by imposing a specific tax on the pulp and paper factories.

The socially optimal quantity of pollution emissions occurs where:

the marginal social benefit of pollution is equal to the marginal social cost of pollution.

Because the general market mechanism does not take into account the side effects that harm bystanders, a market economy will produce _____ without any government regulation.

too much pollution