Question 1

Figure: Pollution and Efficiency   (Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency.If this market, where sulfur emissions are a result of production, produced ________ units of emissions, then _.

Accepted Answer

The answer of Figure: Pollution and Efficiency   (Figure:...

Question 2

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.The efficient quantity of pollution is tons.

Accepted Answer

The answer of   (Table: Coal Mine Pollution) The...

Question 3

The proposition that if transaction costs are low enough, the private market can achieve an efficient outcome regardless of which of the affected parties hold the property rights is known as the:

Accepted Answer

This is known as the Coase theorem, which states that when transaction costs are low, parties will bargain and reach an efficient outcome regardless of the initial assignment of property rights.

Question 4

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.If 5 tons of pollution is produced, the outcome is ________ because _.

Accepted Answer

At 5 tons of pollution, the MSB is greater than the MSC. Therefore, producing 5 tons of pollution is not efficient. The best choice would be to produce less than 5 tons of pollution in order for the MSB to equal the MSC and achieve efficiency.

Question 5

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.At the efficient quantity of pollution:

Accepted Answer

At the efficient quantity of pollution, the marginal social cost of pollution is equal to the marginal social benefit of pollution. This is the point where the total net benefit (benefits minus costs) is maximized, and any deviation from this quantity would result in a decrease in overall welfare.

Question 6

Figure: Pollution and Efficiency  (Figure: Pollution and Efficiency) Point in the figure Pollution and Efficiency represents an efficient solution in this
Market, where sulfur emissions is a result of production.

Accepted Answer

The answer of Figure: Pollution and Efficiency  (Figure: Pollution...

Question 7

Figure: Pollution and Efficiency   (Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency.In this market, where sulfur emission is a result of production, an efficient solution is one in which:

Accepted Answer

An efficient solution is achieved when the marginal social cost (MSC) of production is equal to the marginal social benefit (MSB) of consumption. This is the point where the market reaches allocative efficiency and resources are being used to produce the optimal quantity of the good. Therefore, the correct choice is D, since MSC = MSB at the efficient solution. A is incorrect because MSB should be greater than MSC in order for the market to be willing to consume the good, and B is incorrect because MSC must be kept as low as possible to avoid negative externalities, which can be achieved by reducing the level of production. C is incorrect because total cost and total benefit are irrelevant in determining the efficient solution.

Question 8

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.If 5 tons of pollution is produced, the marginal social benefit is , and
The marginal social cost is _.

Accepted Answer

The answer of (Table: Coal Mine Pollution) The table Coal...

Question 9

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.If 5 tons of pollution is produced:

Accepted Answer

At 5 tons of pollution, the marginal social benefit is equal to the marginal social cost, meaning that the efficient or socially optimum amount of pollution is being produced.

Question 10

Figure: Pollution and Efficiency   (Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency.In this market, where sulfur emission is a result of production, too much pollution is found when the price is ________ and the quantity is _.

Accepted Answer

In the figure, the point where the Marginal Social Cost (MSC) curve intersects with the Marginal Private Cost (MPC) curve represents the socially optimal level of production. At this point, the price is $5 and the quantity is 40. However, at this level of production, there is still some sulfur emission and hence some pollution. The point where the Marginal Social Benefit (MSB) curve intersects with the Demand (D) curve represents the private optimal level of production where there is no pollution. At this point, the price is higher at $20, but the quantity is much lower at 20. Therefore, too much pollution is found at the socially optimal level of production where the price is $5 and the quantity is 40.

Question 11

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.At the market-determined quantity of pollution, the marginal social cost of pollution is:

Accepted Answer

The marginal social cost of pollution is the cost to society of the additional pollution. At the market-determined quantity of pollution, the marginal social cost of pollution is equal to the marginal social benefit of pollution. The marginal social benefit of pollution is the benefit to society of the additional pollution. In this case, the marginal social benefit of pollution is $400. Therefore, the marginal social cost of pollution is also $400.

Question 12

Figure: Pollution and Efficiency   (Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency.If this market, where sulfur emission is a result of production, produced ________ units of emissions, then _.

Accepted Answer

The answer of Figure: Pollution and Efficiency   (Figure:...

Question 13

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.The market-determined quantity of pollution is tons.

Accepted Answer

The answer of (Table: Coal Mine Pollution) The table Coal...

Question 14

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.At the efficient quantity of pollution the marginal social cost of pollution is:

Accepted Answer

The efficient quantity of pollution is where the marginal social benefit (MSB) equals the marginal social cost (MSC). At a pollution level of 3, the MSB is $600 and the MSC is $400, which is the efficient level of pollution. Therefore, the marginal social cost of pollution at the efficient quantity is $400.

Question 15

The idea that even in the presence of externalities an economy can reach an efficient solution as long as transaction costs of making a deal are low is known as:

Accepted Answer

The statement described is a basic summary of the Coase theorem. It states that even in the presence of externalities, an efficient solution can be reached through negotiations between affected parties as long as transaction costs are low. The theorem was articulated by economist Ronald Coase in his 1960 paper "The Problem of Social Cost."

Question 16

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.At the efficient quantity of pollution the marginal social benefit of pollution is:

Accepted Answer

The efficient quantity of pollution is where the marginal social benefit equals the marginal social cost. From the table, we can see that this occurs at a pollution level of 200 tons, where the marginal social benefit is $400.

Question 17

Figure: Pollution and Efficiency   (Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency.In this market, where sulfur emissions are a result of production, an efficient solution takes place at a price of ________ and a quantity of _.

Accepted Answer

The point where the marginal benefit (MB) of reducing pollution equals the marginal cost (MC) of reducing pollution is the efficient solution. In this figure, it occurs at a price of $15 and a quantity of 30. Therefore, option B is the correct answer.

Question 18

A familiar example of a negative externality is loud music on a college campus.In principle, it should be possible to internalize this externality by permitting students to negotiate about rights to play music during particular time periods.The most likely reason that this does not happen is that:

Accepted Answer

The transaction costs associated with identifying and establishing communication with students would be high. Negotiating and enforcing agreements among students would be costly, time-consuming, and highly impractical. Therefore, it is unlikely that this solution will be implemented. Most likely, the college authorities will have to impose some restrictions or regulations to address the negative externality created by loud music.

Question 19

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.At the market-determined quantity of pollution, the marginal social benefit of pollution is:

Accepted Answer

The market-determined quantity of pollution is where the marginal social benefit equals the marginal social cost, which in this case is 600 units of pollution. At this level of pollution, the marginal social benefit is zero, so it is not beneficial to produce any more pollution beyond this level. Therefore, the best choice is to reduce pollution to 600 units.

Question 20

According to the Coase theorem, the private market can achieve an efficient outcome:

Accepted Answer

The Coase theorem suggests that if transaction costs are low and property rights are well-defined, parties can negotiate to reach an efficient outcome regardless of who holds the initial property rights.

Quiz 16: Externalities

Figure: Pollution and Efficiency (Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency.If this market, where sulfur emissions are a result of production, produced ________ units of emissions, then _.

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.The efficient quantity of pollution is tons.

The proposition that if transaction costs are low enough, the private market can achieve an efficient outcome regardless of which of the affected parties hold the property rights is known as the:

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.If 5 tons of pollution is produced, the outcome is ________ because _.

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.At the efficient quantity of pollution:

Figure: Pollution and Efficiency (Figure: Pollution and Efficiency) Point in the figure Pollution and Efficiency represents an efficient solution in this Market, where sulfur emissions is a result of production.

Figure: Pollution and Efficiency (Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency.In this market, where sulfur emission is a result of production, an efficient solution is one in which:

(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social benefit and the marginal social cost of various amounts of pollution from a coal mine.If 5 tons of pollution is produced, the marginal social benefit is , and The marginal social cost is _.