FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 10: Externalities

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 221

Multiple Choice

Review LaterAdd Note

Review Later

Since externalities tend to keep markets from reaching a socially optimal equilibrium,government action

A) is always needed because private solutions can never be attained.
B) is needed when private solutions fail to arise.
C) will be needed only to correct for positive externalities.
D) will be needed only to correct for negative externalities.

E) C) and D)
F) None of the above

Correct Answer

verified

Show Answer

Question 222

Multiple Choice

Review LaterAdd Note

Review Later

Two firms,A and B,each currently emit 100 tons of chemicals into the air.The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution emitted into the air.The government gives each firm 40 pollution permits,which it can either use or sell to the other firm.It costs Firm A $200 for each ton of pollution that it eliminates before it is emitted into the air,and it costs Firm B $100 for each ton of pollution that it eliminates before it is emitted into the air.It is likely that

A) Firm A will buy all of Firm B's pollution permits.Each one will cost between $100 and $200.
B) Firm B will buy all of Firm A's pollution permits.Each one will cost between $100 and $200.
C) Both firms will use their own pollution permits.
D) Firm A will buy some of Firm B's pollution permits.Each one will cost less than $100.

E) A) and D)
F) All of the above

Correct Answer

verified

Show Answer

Question 223

Multiple Choice

Review LaterAdd Note

Figure 10-11 -Refer to Figure 10-11.Taking only private value and private cost into account,total surplus at the market equilibrium amounts to

Figure 10-9 -Refer to Figure 10-9.Which graph represents a market with no externality?

Social welfare can be enhanced by allowing firms to trade their rights to pollute.

The Coase theorem suggests that private markets may not be able to solve the problem of externalities

Figure 10-4 -Refer to Figure 10-4.Without government intervention,the equilibrium quantity would be

Using a supply and demand diagram,demonstrate how a positive externality leads to market inefficiency.How might the government help to eliminate this inefficiency?

Table 10-6 The following table shows the total costs for each of four firms (A,B,C,and D) to eliminate units of pollution from their production processes.For example,for Firm A to eliminate one unit of pollution,it would cost $46,and for Firm A to eliminate two units of pollution,it would cost a total of $103. -Refer to Table 10-6.If the government charged a fee of $99 per unit of pollution,how many units of pollution would the firms eliminate altogether?

Figure 10-11 -Refer to Figure 10-11.On the

Alexander lives in an apartment building and gets a $250 benefit from playing his stereo.Mary,who lives next door to Alexander and often loses sleep due to the loud music coming from Alexander's stereo,bears a $350 cost from the noise.Mary would like to offer Alexander some money to turn down the volume on his stereo.If Mary had to hire a lawyer to draw up the contract,what is the maximum amount she could pay to the lawyer to ensure that both Alexander and Mary would benefit from the agreement?

Once tradable pollution permits have been allocated to firms,

Figure 10-17 -Refer to Figure 10-17.How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

Corrective taxes are unlike most other taxes because they

Which of the following statements is true of both pollution permits and corrective taxes?

Table 10-2 The following table shows the private value,private cost,and social value for a market with a positive externality. -Refer to Table 10-2.What is the socially-optimal level of output in this market?

A market for pollution permits can efficiently allocate the right to pollute by using the forces of supply and demand.

Table 10-1 The following table shows the private value,private cost,and external cost for various quantities of output in a market. -Refer to Table 10-1.How large would a corrective tax need to be to move this market from the equilibrium outcome to the socially-optimal outcome?

The Coase theorem suggests that private solutions to an externality problem