Question 1

As a result of the gasoline tax in BC, ________ would bear more of the external cost of pollution and the gap between the marginal private cost of pollution and the marginal social cost of pollution would ________.

Accepted Answer

The gasoline tax in BC would likely be passed on to consumers in the form of higher prices, meaning consumers would bear more of the external cost of pollution. This would help internalize the externality, thus narrowing the gap between the marginal private cost and the marginal social cost of pollution.

Question 2

Goods differ on the basis of whether their consumption is rival and excludable.Explain the terms "rivalry" and "excludability" as they are used to define goods.List the four categories of goods, and define these categories in terms of rivalry and excludability.

Accepted Answer

The answer of Goods differ on the basis of whether...

Question 3

Figure 5.7
  
Figure 5.7 shows the market for Atlantic salmon, a common resource. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂.
-Refer to Figure 5.7.The current market equilibrium output is partly the result of overfishing.In that case, what does S₂ represent?

Accepted Answer

S₂ represents the social marginal cost of harvesting salmon, which includes the cost of overfishing and depletion of the resource. Therefore, the best choice is to reduce the output to Q₂, which represents the socially optimal level of production. This would require reducing the amount of salmon caught, either through regulation or other means, in order to protect the resource and ensure its sustainability.

Question 4

The basic cause of deadweight losses from the existence of common resources and externalities is

Accepted Answer

The existence of common resources and externalities leads to deadweight losses because there are no clearly defined and enforceable property rights. Without property rights, individuals have no incentives to conserve or manage the resources efficiently, which leads to overuse and waste. Similarly, with externalities, individuals may impose costs on others without being held accountable for them, leading to inefficient outcomes. Government intervention, such as the establishment of property rights or the imposition of taxes or regulations, can help address these issues and reduce deadweight losses. The self-interested rationality of human beings is not the basic cause of deadweight losses, but rather a factor that affects individual behavior within the context of institutional arrangements. The use of a market system is not inherently problematic, but can lead to inefficient outcomes in these types of situations, particularly when property rights are not well-defined or externalities are present.

Question 5

Figure 5.7
  
Figure 5.7 shows the market for Atlantic salmon, a common resource. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂.
-Refer to Figure 5.7.The current market equilibrium output is partly the result of overfishing.In that case, what does S₁ represent?

Accepted Answer

S₁ represents the private marginal cost of harvesting salmon, as it reflects the costs incurred by individual fishermen without accounting for the external costs of overfishing on the environment and society.

Question 6

The "tragedy of the commons" refers to the phenomenon where

Accepted Answer

The tragedy of the commons occurs when people overuse a common resource, such as a pasture or fishery, resulting in depletion or degradation of the resource. This happens because individuals act in their own self-interest and do not take into account the impact of their actions on others who also use the resource. As a result, everyone ends up worse off in the long run.

Question 7

A quasi-public good is similar to a public good in that one person's consumption of the quasi-public good does not reduce the amount available for everyone else.

Accepted Answer

A quasi-public good, like a public good, exhibits non-rivalrous consumption, meaning that the consumption of one individual does not reduce the availability of the good for others.

Question 8

Global warming refers to the effect of global pollutants such as carbon dioxide on climates on the earth.Climate-induced changes in temperatures affect, among other things, agriculture.Which of the following is a reason why policymakers are still debating if this problem should be addressed and how it should be addressed?

Accepted Answer

There is significant disagreement among scientists and policymakers about the extent of damage caused by carbon emissions, the benefits of reducing them, and the methods to achieve reduction, which complicates decision-making.

Question 9

In 2012, the Government of British Columbia enacted the final planned increase in its tax on gasoline.The goal of this program is to

Accepted Answer

The goal of the government's tax on gasoline was to reduce greenhouse gas emissions in British Columbia. This tax was part of a larger initiative aimed at fighting climate change and promoting sustainability in the province.

Question 10

A product is considered to be excludable if it is jointly owned by all members of a community.

Accepted Answer

A product is excludable if it can be controlled and limited to certain individuals, meaning that not everyone in the community has equal access or ownership of it. Joint ownership by all members of a community would make it non-excludable.

Question 11

A tragedy of the commons occurs when a resource is

Accepted Answer

Tragedy of the commons occurs when a resource is rival (meaning its use by one individual reduces the availability for others) and non-excludable (meaning it is impossible to restrict its use by those who have not paid for it). This creates a situation where individuals act in their own self-interest, leading to overuse and depletion of the resource, to the detriment of everyone.

Question 12

"When it comes to public goods, individuals do not reveal their true preferences because it is not in their self interest to do so." Evaluate this statement.

Accepted Answer

The answer of "When it comes to public goods, individuals...

Question 13

Which of the following exemplifies the tragedy of the commons?

Accepted Answer

The Malaysian tapir is a shared resource that is being depleted by poaching. The tragedy of the commons refers to the depletion of a shared resource due to the collective actions of individuals who exploit the resource for their own benefit without regard for its long-term sustainability.

Question 14

The tragedy of the commons was avoided in the Middle Ages by

Accepted Answer

In the Middle Ages, common land was often used by families for grazing their animals and gathering resources. To prevent overuse and depletion of these resources, there was a strong social pressure to uphold traditionally accepted limits on family use of the commons. This prevented the tragedy of the commons from occurring, as people felt a sense of responsibility towards their community and the shared resources. The other options - selling common grounds to individuals, monitoring entry into the commons, and imposing a tax for the use of the commons - were not commonly used during this period.

Question 15

A quasi-public good differs from a public good in that unlike a public good, it is possible to keep out those who do not pay for the quasi-public good from enjoying the benefits of the good.

Accepted Answer

A quasi-public good, also known as a club good, is a type of good that displays some characteristics of both public goods and private goods. While it is non-rivalrous, meaning that its consumption by one individual does not decrease the availability of the good for others to consume, it is excludable, meaning that it is possible to restrict access to those who do not pay for it. This distinguishes it from public goods, which are both non-rivalrous and non-excludable.

Question 16

Which of the following is an example of a common resource?

Accepted Answer

Sea otters in coastal waters off Queen Charlotte Islands are an example of a common resource because they are not owned by anyone and can be accessed and utilized by anyone.

Question 17

Overuse of a common resource may be avoided by all of the following methods except

Accepted Answer

Government taking over ownership of all private common resources is not a method to avoid overuse of a common resource, as it does not address the issue of regulating the consumption of the resource. The other options, including charging for use, issuing tradable permits, and setting quotas/legal limits, all aim to limit the use of the common resource and encourage sustainable resource management.

Question 18

Figure 5.7
  
Figure 5.7 shows the market for Atlantic salmon, a common resource. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂.
-Refer to Figure 5.7.Identify the area that shows the deadweight loss from overfishing.

Accepted Answer

The answer of Figure 5.7
  
Figure 5.7 shows the...

Question 19

Determine if each of the products below displays any of the following characteristics:
(i) rivalry
(ii) nonrivalry
(ii) excludability
(iv) nonexcludability.
a.a highway during peak commute hours
b.an online course
c.infectious disease prevention
d.open source software such as Linux
e.a movie showing at Cineplex Theatres

Accepted Answer

The answer of Determine if each of the products below...

Question 20

Consider the stock of ocean tuna which is massively overfished.It is rational for an individual to exploit the resource rather than to conserve the stock because

Accepted Answer

The answer of Consider the stock of ocean tuna which...

Quiz 5: Externalities, Environmental Policy, and Public Goods

As a result of the gasoline tax in BC, would bear more of the external cost of pollution and the gap between the marginal private cost of pollution and the marginal social cost of pollution would .