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Exam 16: Externalities

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Question 41

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Oscar owns a meat processing plant whose unpleasant odors waft across the city.Because the production of processed meat provides a negative externality to the community, at the market equilibrium quantity, the marginal social:

A) cost of processed meat exceeds the market price.
B) benefit of processed meat exceeds the market price.
C) cost of processed meat is lower than the market price.
D) benefit of processed meat is lower than the market price.

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Question 42

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Markets for the right to pollute are:

A) created by individual firms when they reduce pollution emissions.
B) created by government when it issues tradable pollution permits.
C) likely to result in fewer incentives to find and create technology that reduces
D) pollution.a means by which more pollution is encouraged.

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Question 43

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Your community requires the sewage treatment plant to process raw sewage so that it is safe to return the water to the environment.This is an example of:

There are benefits resulting indirectly from pollution because:

(Table: Externalities from Parks) The table Externalities from Parks shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park.If 5 acres is dedicated to the park, this outcome is _________ because _ .

Which of the following is usually associated with a positive externality?

The efficient quantity of pollution emissions occurs where:

(Table: Externalities from Parks) The table Externalities from Parks shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park.The socially optimum amount of land dedicated to the public park will be acres.

Which of the following is an example of a negative externality?

Figure: Efficiency and Pollution (Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution.An optimal Pigouvian tax of can move This market to the socially optimal quantity of pollution.

Scenario: Private and External Benefits A small community finds that tidy lawns and neighborhoods provide both private and external benefits.They determine that the marginal private benefit (MPB) of lawns can be represented by the following equation: MPB = 50 - 0.5Q, where Q is the number of hours spent on keeping lawns tidy.The marginal private cost (MPC) of such lawn upkeep is represented by the following equation: MPC = 0.5Q, where Q is again the number of hours engaged in lawn upkeep. (Scenario: Private and External Benefits) Look at the scenario Private and External Benefits.The community estimates the marginal social benefit from lawn upkeep to be $15.Given this information, what is the socially optimal amount of lawn upkeep for this community?

When farmers raise pigs, there are a number of external costs.In particular, raising pigs generates methane gas.If the marginal external cost is $100 per pig and the government imposes a tax of $200 per pig, then at the equilibrium price and quantity of pigs:

Figure: Efficiency and Pollution (Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution.In the absence of government intervention, the marginal social cost of pollution will equal ________ while the marginal social benefit of pollution will equal _.

A principal cause of market failure is actions generating side effects that are not properly taken into account by the market.False

Suppose the production of roses generates a positive externality in that travelers enjoy the scenic rural vistas.Then the market quantity of roses produced and consumed:

If a production activity generates a negative externality, then the marginal social cost is equal to the marginal cost of production reduced by the marginal external cost.True

A copper mining operation discharges waste products into a river and causes higher costs and discomfort to downstream users of the water for which they are not compensated.In this case:

When farmers raise pigs, there are a number of external costs.In particular, raising pigs generates methane gas.Without government regulation, the equilibrium price and quantity of pigs raised means that:

A market economy will produce without any government regulation.

Figure: Three Firms That Pollute (Figure: Three Firms that Pollute) Three firms in a small city are responsible for emitting pollution, and the marginal benefit of the individual polluters is shown in the figure Three Firms That Pollute.If each company is allowed to emit only 300 tons of pollution per day, which company will be most adversely affected?