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Exam 9: Economics of the Environment

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Question 61

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When the production of a good creates an external cost, by setting the tax rate equal to the _______ , firms can be made to behave in the same way as they would if they bore the cost of the externality directly.

A) marginal private benefit
B) marginal external cost
C) marginal social cost
D) marginal social benefit

E) None of the above
F) All of the above

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Question 62

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Pollution occurs when timber is produced. If the timber market is unregulated, there will be

A) underproduction of timber compared to the efficient amount.
B) overproduction of timber compared to the efficient amount.
C) sometimes overproduction and sometimes underproduction of timber compared to the efficient amount.
D) an external benefit to producing timber.

E) A) and C)
F) A) and D)

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Question 63

Multiple Choice

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When producers are hard to monitor and marginal costs differ across producers, _______ are an effective method to achieve efficient use of a _______.

-The figure above shows the private marginal cost curve, the social marginal cost curve and the market demand curve. If a constant per unit tax is imposed that generates an efficient allocation of resources, then producers receive a per unit price of

When the production of a good creates an external cost, one method of achieving the efficient allocation is to impose a tax such that

The marginal cost of production that is borne by the entire society is the

If an external cost exists, who bears it in an unregulated, competitive market transaction?

When the production of a good has an external cost, the

Consider the production of some industrial good that involves air pollution. The table below gives the marginal social cost (MSC) , the marginal cost (MC) , and the marginal social benefit (MSB) for each level of output (Q) . To arrive at the efficient market equilibrium the government could impose a tax of

According to the Coase theorem, part of what is needed for private transactions to be efficient is that property rights

The _______ is the cost of production paid by the producer plus any cost paid by everyone else when another unit of a good or service is produced.

-The tables above show the marginal costs and benefits from the production of paper. If the market is perfectly competitive and unregulated, the

-The figure above shows the private marginal cost curve, the social marginal cost curve and the market demand curve. If the market is unregulated, then the price is

Generating electricity creates air pollution. This industry, if left unregulated will produce at an inefficient market equilibrium where

-The figure above shows the demand curve, the marginal private cost curve and the marginal social cost curve of good A. What is the efficient quantity of good A?

When producing a good creates pollution, an external cost, and the government imposes a tax equal to the marginal external cost, then

Let MC be the marginal private cost per megawatt hour (MWh) of producing electricity using coal. Let MSC be the marginal social cost per MWh and T be the tax per MWh. To achieve efficiency, the tax should be set so that

If the government assigns private property rights to a common resource, then the

Which of the following is true?

-The figure above illustrates the problem of overcrowding and external costs experienced during the summer months in a national park. If the market is unregulated, in equilibrium the external cost of visiting the national park is given by the distance between