Economics Chapter 16 The marginal social benefit of pollution increases

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Figure: Positive Externalities and the Production of Semiconductor Chips

Reference: Ref 16-15

(Figure: Positive Externalities and the Production of Semiconductor Chips) Look at the figure Positive

Externalities and the Production of Semiconductor Chips. If the socially optimal production of chips is

600, the government could achieve the socially optimal level of production by granting a Pigouvian

subsidy of:

208. Multiple Choice: The marginal social cost of a unit of...

Question The marginal social cost of a unit of pollution:

209. Multiple Choice: The marginal social benefit of pollut...

Question The marginal social benefit of pollution:

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210. Multiple Choice: Figure: The Quantity of Pollution Ref…

Question Figure: The Quantity of Pollution

Reference: Ref 16-18

(Figure: The Quantity of Pollution) Look at the table The Quantity of Pollution. If the amount of pollution

emitted is 150, then:

211. Multiple Choice: Figure: The Quantity of Pollution Ref…

Question Figure: The Quantity of Pollution

Reference: Ref 16-18

(Figure: The Quantity of Pollution) Look at the table The Quantity of Pollution. The socially optimal level of

pollution emissions for this economy is:

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212. Multiple Choice: Figure: The Quantity of Pollution Ref…

Question Figure: The Quantity of Pollution

Reference: Ref 16-18

(Figure: The Quantity of Pollution) Look at the table The Quantity of Pollution. When this economy

produces 50 tons of emissions, it:

213. Multiple Choice: An emissions tax will:

Question An emissions tax will:

214. Multiple Choice: Firm A and firm B both produce a good...

Question Firm A and firm B both produce a good that causes pollution, but the firms differ in their marginal benefit

from pollution. In this case, an emissions standard would:

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215. Multiple Choice: Pigouvian taxes:

Question Pigouvian taxes:

217. Multiple Choice: Both emissions taxes and tradable emi...

Question Both emissions taxes and tradable emissions permits:

218. Multiple Choice: Positive externalities are:

Question Positive externalities are:

219. Multiple Choice: Flu vaccines often provide both priva...

Question Flu vaccines often provide both private benefits to individuals and positive external benefits to other

members of society. As a result, without government intervention one would find:

Answer too many doses of flu vaccine being produced, since external benefits would not be considered.

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220. Multiple Choice: Suppose each person in a community ha...

Question Suppose each person in a community had to pay for his or her own education from kindergarten through

high school. One would expect that:

221. Multiple Choice: In order to encourage consumption of …

Question In order to encourage consumption of a good that generates positive externalities, policymakers would:

Answer impose a tax on the amount consumed in order to achieve the socially optimal level.

222. Multiple Choice: A good is subject to a network extern…

Question A good is subject to a network externality when:

Answer the value of the good to an individual is less when a large number of other people also use the good.

223. Multiple Choice: Network externalities are often:

Question Network externalities are often:

Answer separate from positive feedback.

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224. Multiple Choice: Scenario: Private and External Benefi…

Question 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.

Reference: Ref 16-19

(Scenario: Private and External Benefits) Based on the information provided in the scenario Private and

External Benefits, how many hours of lawn upkeep will occur in this community, and what will be the

marginal private benefit of such upkeep?

Answer 50 hours; $50

225. Multiple Choice: Scenario: Private and External Benefi…

Question 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.

Reference: Ref 16-19

(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?

226. Multiple Choice: Scenario: Private and External Benefi…

Question 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.

Reference: Ref 16-19

(Scenario: Private and External Benefits) Look at the scenario Private and External Benefits. The

community decides that given all the benefits of lawn upkeep, it is important to maintain the socially

optimal number of lawn upkeep hours. In order to achieve this, the community will:

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227. Multiple Choice: Figure: Marginal Private Benefits and...

Question Figure: Marginal Private Benefits and Marginal Social Benefits

Reference: Ref 16-20

(Figure: Marginal Private Benefits and Marginal Social Benefits) Look at the figure Marginal Private

Benefits and Marginal Social Benefits. Without government intervention, this market will produce

________ units at a price of ________.

Answer Q0; P0

228. Multiple Choice: Figure: Marginal Private Benefits and...

Question Figure: Marginal Private Benefits and Marginal Social Benefits

Reference: Ref 16-20

(Figure: Marginal Private Benefits and Marginal Social Benefits) Look at the figure Marginal Private

Benefits and Marginal Social Benefits. If government does intervene and encourages the market to

produce and price at the socially optimal level, what will be the output and price?

Answer Q0; P0

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229. Multiple Choice: Figure: Marginal Private Benefits and...

Question Figure: Marginal Private Benefits and Marginal Social Benefits

Reference: Ref 16-20

(Figure: Marginal Private Benefits and Marginal Social Benefits) Look at the figure Marginal Private

Benefits and Marginal Social Benefits. One way for the government to achieve this socially optimal level

is by:

Answer imposing a per-unit tax equal to P1 – P2.

230. Essay: If pollution is such a bad thing, why…

Question If pollution is such a bad thing, why do economists argue that the optimal amount of pollution is

something greater than zero?

231. Essay: What is meant by a negative externali…

Question What is meant by a negative externality? Use an example in your explanation.

232. Essay: What is meant by a positive externali...

Question What is meant by a positive externality? Use an example to assist your explanation.

Answer

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233. Essay: Brad and Angelina are neighbors. Brad...

Question Brad and Angelina are neighbors. Brad never mows his yard, rakes his leaves, or trims his hedges. His

overgrown yard is not only an eyesore, it is pulling down the value of Angelina‘s house. How could the

Coase theorem be used to remedy this negative externality? Does it matter whether Brad has the right to

ignore his yard or whether Angelina has the right to force him to clean it up?

234. Essay: Industrial production of goods create…

Question Industrial production of goods creates pollution that damages the environment. Suppose the marginal

social cost of pollution can be represented by the function MSC = 2T, where T represents tons of

pollution. Suppose the marginal social benefit of pollution can be represented by the function MSB =

1000 – 2T.

235. Essay: In an unregulated market, how much po…

Question In an unregulated market, how much pollution will be emitted as goods and services are produced? Why

is this market outcome inefficient?

236. Essay: Why do economists argue that an emiss…

Question Why do economists argue that an emissions tax is a more efficient way to reduce pollution than an

environmental standard?

237. Essay: Reference: Ref 16-17 (Table: Polluti…

Question

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Reference: Ref 16-17

(Table: Pollution and Marginal Cost of Reduction) Look at the table Pollution and Marginal Cost of

Reduction. There are two large firms in your community, Big Chemical and Mega Manufacturing, and

each is a significant source of pollution. Combined, they are producing 500 tons of pollution, and the EPA

has determined that pollution levels should be much lower, 250 tons. The table shows the current

pollution levels for each firm and the marginal cost of reducing pollution for each firm. The marginal cost is

constant.

a) If the EPA dictated that each firm must emit only 125 tons of pollution, how much total cost would the

firms incur to meet this environmental standard?

b) If the EPA distributed 125 pollution permits to each firm, each giving the firm the right to emit one ton

of pollution, which firm will sell pollution permits, and which firm will buy pollution permits?

c) Under this system of pollution permits, what is the total cost to the firms of reducing pollution to the

limit of 250 total tons?

238. Essay: Economists say that when an activity …

Question Economists say that when an activity provides a positive externality to the community, the market does

not produce enough of that activity. Why?

239. Essay: Some politicians are pushing for deve…

Question Some politicians are pushing for development of a car that is powered by hydrogen fuel cells rather than

gasoline. How could the absence of a network externality hinder the adoption of this vehicle?

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