Micro Economics Chapter 10
Command - and - control policy is another term for
A government regulation
An externality is an example of
A market failure
Employing a lawyer to draft and enforce a private contract between parties wishing to solve an eternality problem is an example of
A transaction cost
Negative externality arises when a person engages in an activity that has
An adverse effect on a bystander who is not compensated by the person who causes the effect
Transaction costs
Can keep private parties from solving externalities
Emission controls an auto mobiles are examples of
Command - and - control policy to increase social efficiency
Suppose cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced
Equilibrium quantity is less than socially optimal quantity
Which is not correct
Externalities cannot be positive
Positive externality
Government should tax goods with negative externalities and subsidize goods with positive externalities
Which is correct
Government should tax goods with negative externalities and subsidize goods with positive externalities
Since restored historic buildings convey a positive externality, local governments may choose to
Increase property taxes in historic areas Provide tax breaks to owners who restore them
A positive externality
Is a benefit to a market bystander
A negative externalities
Is an adverse impact on a bystander
A corrective tax
Places a price on the right to pollute
When externalities cause markets to be ineffective
Private solutions can be developed to solve the problem
When negative externalities are present in a market
Producers will supply too much of the product
Patents do not
Protect the rights of inventors for their lifetimes
When an industry is characterized by technology spillover, what should the government do to ensure market equilibrium equals the socially optimal equilibrium, equals the socially optimal equilibrium
Provide a subsidy equal to the value of the technology spillover
Research into new technologies
Provides positive externalities because it creates knowledge others can use
Which is not a negative externality associated with driving cars
Repairs
If the government wanted to ensure that the market reaches the socially optimal equilibrium in the presence of a technology spillover, it should
Subsidize producers by an amount equal to the value of the technology spill over
If elementary education creates a postive externality and the governmemt does not subsidize education then
The equilibrium quantity of education will be less than the socially optimal quantity of education
When a particular negative eternality affects a very large number of people it is likely that
The solution to externalities suggested by the coas theorem will not work
The coase theorem suggests that private solutions to an externality problem
Will usually allocate resources efficiently if private parties can bargain without cost
Which of the following is a difference between corrective taxes and tradable pollution permits
With a corrective tax the government sets the price of the pollution; with tradable pollution permits, demand and supply set tge price of pollution
