FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 10: Externalities

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Essay

Review LaterAdd Note

Review Later

Scenario 10-3 ​ Suppose the equation for the demand curve in a market is P = 120 - (1/5) Q^D , where Q^D is the quantity demanded and $P$ is the price. Also, suppose the equation for the supply curve in the same market is P = (1/10) Q^S , where Q^S is the quantity supplied. -Refer to Scenario 10-3. What are the market equilibrium quantity and price?

Correct Answer

verified

The market equilibri...

View Answer

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

Figure 10-4 -Refer to Figure 10-4. The installation of a scrubber in a smokestack reduces the emission of harmful chemicals from the smokestack. Therefore, the market for smokestack scrubbers is shown in

A) Graph (a) .
B) Graph (b) only.
C) Graph (c) only.
D) Graphs (b) and (c) .

E) B) and C)
F) B) and D)

Correct Answer

verified

Show Answer

Question 43

True/False

Review LaterAdd Note

The least expensive way to clean up the environment is for all firms to reduce pollution by an equal percentage.

If a sawmill creates too much noise for local residents,

Table 10-3 ​ ​ $\begin{array} { | c | c | c | c | } \hline \begin{array} { c } \text { Quantity } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Private Value } \\\text { (Dollars) }\end{array} & \begin{array} { c } \text { Private Cost } \\\text { (Dollars) }\end{array} & \begin{array} { c } \text { External Benefit } \\\text { (Dollars) }\end{array} \\\hline 1 & 22 & 12 & 10 \\\hline 2 & 20 & 15 & 10 \\\hline 3 & 18 & 18 & 10 \\\hline 4 & 16 & 21 & 10 \\\hline 5 & 14 & 24 & 10 \\\hline 6 & 12 & 27 & 10 \\\hline\end{array}$ -Refer to Table 10-3. The market equilibrium quantity of output is

Table 10-1 ​ $\begin{array} { | c | c | c | c | } \hline \begin{array} { c } \text { Quantity } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Private Value } \\\text { (Dollars) }\end{array} & \begin{array} { c } \text { Private Cost } \\\text { (Dollars) }\end{array} & \begin{array} { c } \text { External Cost } \\\text { (Dollars) }\end{array} \\\hline 1 & 28 & 12 & 4 \\\hline 2 & 26 & 14 & 4 \\\hline 3 & 24 & 16 & 4 \\\hline 4 & 22 & 18 & 4 \\\hline 5 & 20 & 20 & 4 \\\hline 6 & 18 & 22 & 4 \\\hline 7 & 16 & 24 & 4 \\\hline\end{array}$ -Refer to Table 10-1. What is the socially optimal quantity of output in this market?

Scenario 10-4 The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500^th fire extinguisher entails the following: • a private cost of $10; • an external cost of $0; • a private value of $9; • an external benefit of $3. -Refer to Scenario 10-4. In order to maximize the total benefit of fire extinguishers to society as a whole, should the number of fire extinguishers produced be less than, equal to, or greater than 500? Explain.

Scenario 10-3 ​ Suppose the equation for the demand curve in a market is P = 120 - (1/5) Q^D , where Q^D is the quantity demanded and $P$ is the price. Also, suppose the equation for the supply curve in the same market is P = (1/10) Q^S , where Q^S is the quantity supplied. -Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What is the social cost of producing 30 units of the good?

Which of the following statements is not correct?

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

The Coase theorem suggests that taxes should be enacted to alleviate the effects of negative externalities.

Tyler owns a dog and receives a $300 benefit from owning it. Tyler's neighbor, Liz, incurs a cost of $450 from the dog's barking. Suggest a deal between Tyler and Liz that would result in both individuals becoming better off.

Figure 10-6 ​ -Refer to Figure 10-6. If 325 units of plastics are produced and consumed, then the

All externalities impose a cost on others. ​

Which of the following statements about a well-maintained yard best conveys the general nature of the externality?

Does the phenomenon of externalities strengthen the argument that we should rely upon the "invisible hand" of the marketplace, or does it weaken that argument?

Table 10-1 ​ $\begin{array} { | c | c | c | c | } \hline \begin{array} { c } \text { Quantity } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Private Value } \\\text { (Dollars) }\end{array} & \begin{array} { c } \text { Private Cost } \\\text { (Dollars) }\end{array} & \begin{array} { c } \text { External Cost } \\\text { (Dollars) }\end{array} \\\hline 1 & 28 & 12 & 4 \\\hline 2 & 26 & 14 & 4 \\\hline 3 & 24 & 16 & 4 \\\hline 4 & 22 & 18 & 4 \\\hline 5 & 20 & 20 & 4 \\\hline 6 & 18 & 22 & 4 \\\hline 7 & 16 & 24 & 4 \\\hline\end{array}$ -Refer to Table 10-1. What is the equilibrium quantity of output in the market?

Corrective taxes cause deadweight losses, reducing economic efficiency.

Government subsidized scholarships are an example of a government policy aimed at correcting negative externalities associated with education.

The Environmental Protection Agency (EPA) cannot reach a target level of pollution through the use of pollution permits.