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Exam 17: Externalities

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Question 161

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What is an individual transferable quota (ITQ)?

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An ITQ is a production limit that is ass...

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Question 162

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If the marginal social cost of a good equals the marginal private cost of the good, then the marginal external cost of the good

A) is zero.
B) equals the marginal social cost.
C) equals the marginal social benefit.
D) equals the marginal private benefit.

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Question 163

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-In the figure above, if the market is unregulated

-Based on the data in the table above, the efficient level of output equals

-The above figure shows the marginal benefits and marginal costs of a college education. What is the amount of the external benefit in the figure?

The Loma Linda City Council made it official in June 2008, passing the most restrictive smoking ordinance yet in the Inland area. Dr. Linda Ferry, who counsels veterans on quitting smoking at Jerry L. Pettis Memorial VA Medical Center, said that the smoking ordinance would protect children from exposure to secondhand smoke and discourage teenagers and adults from taking up smoking. What is TRUE about this situation?

The cost of producing a good or service that is paid by people other than the producers is

Those opposed to fracking, a method of extracting natural gas through breaking up underground rocks with chemicals and water, warn that this method might pollute nearby sources of drinking water. -If this pollution occurs, one way of reaching efficient production levels is by setting a Pigovian Tax. To achieve efficiency with this tax means that the tax must equal the

-The table above provides information about the marginal private benefit for education. The marginal private cost, which also equals the marginal social cost, of educating a student is $16,000 per year and does not change as more students are educated. There is an external benefit from education that is equal to $12,000 per student year and does not change as more students are educated. If the government undertakes public provision of the efficient amount of education, how much will the government charge for tuition?

A copper ore refiner pollutes the water upstream from a brewery. These are the only two parties involved. The transactions costs of reaching an agreement between the refinery and the brewery are low. The amount of water pollution will be at the efficient level

What is a cap-and-trade policy? (Be certain to mention marketable permits.) Suppose there are two firms in an area, each emitting tons of sulfur. The government decides on a target level of 200 tons of sulfur, and gives each firm a permit to emit 100 tons of sulfur. Suppose Firm A is very efficient and can reduce pollution by 100 tons with an abatement cost of $500. Firm B has an older plant, so it will cost Firm B $1,000 to reduce emissions by 100 tons. What will occur with marketable permits?

-Use the figure above to answer this question. Explain what the marginal social cost curve and the marginal external cost mean. In the figure, if the market is competitive and unregulated, what is the equilibrium price and quantity? What is the efficient amount of output? Illustrate the deadweight loss.

-The table above gives the marginal social cost (which equals the price), marginal private benefit, and marginal social benefit of students attending Diablo Valley College (DVC) in Concord, California. a) When 4,500 students attend DVC, what does the marginal external benefit equal? b) If the market is competitive and left without government intervention, what is the quantity of students that will attend DVC and what will be the price of a course? c) What is the efficient quantity of students attending DVC? d) If the government can set the price per course, in order to have the efficient quantity of students attending DVC, what should the government set as the price?

A voucher can eliminate the deadweight loss and lead to an efficient outcome if the value of the voucher equals the ________ of the good.

The cost of producing one more unit of a good or service that is paid by the producer

Individuals making decisions about how much to purchase of a product with an external benefit base their decisions on which of the following?

-In the above table, the efficient level of output can be achieved through a per unit subsidy of

Which of the following illustrates the concept of external benefit?

A country has several factories that emit sulfur dioxide. The main methods that the government can use to overcome the accompanying environment externalities include all of the following EXCEPT

The external benefit of a good