Category: Externality & Internality

A. equilibrium quantity to exceed the optimal quantity
B. equilibrium quantity to equal the optimal quantity
C. optimal quantity to exceed the equilibrium quantity
D. equilibrium quantity to be either above or below the optimal quantity

A. an attempt to internalize a positive externality
B. an attempt to internalize a negative externality
C. a Pigouvian tax
D. a command-and-control policy

A. a social cost curve that is above the supply curve (private cost curve) for a good
B. none of these answers
C. a social value curve that is above the demand curve (private value curve) for good
D. a social value curve that is below the demand curve (private value curve) for a good

A. Thomas will pay Roberto between €100 and €150 and Roberto will continue to play loud music
B. Roberto will pay Thomas €150 and Roberto will continue to play loud music
C. Thomas will pay Roberto between €100 and €150 and Roberto will stop playing loud music
D. Roberto will pay Thomas €100 and Roberto will stop playing loud music

A. Pigouvian taxes, command-and-control policies, tradable pollution permits.
B. tradable pollution permits, Pigouvian taxes, command-and-control policies
C. tradable pollution permits command-and-control policies, Pigovian taxes.
D. command-and-control policies, tradable pollution permits, Pigovian taxes.
E. They would all rank equally high because the same result can be obtained from any one of the policies

A. the regulators decide how much each polluter should reduce its pollution.
B. no pollution of the environment is tolerated
C. each polluter reduces its pollution an equal amount
D. the polluters with the lowest cost of reducing pollution reduce their pollution the greatest amount

A. ban the good creating the externality
B. tax the good
C. subsidize the good
D. have the government produce the good until the value of an additional unit is zero

A. a social cost curve that is below the supply curve (private cost curve) for a good
B. none of these answers
C. a social cost curve that is below the supply curve (private cost curve) for a good
D. a social value curve that is above the demand curve (private value curve) for a good

A. All of these answers are true
B. Pigouvian taxes and tradable pollution permits create an efficient market for pollution.
C. Tradable pollution permits efficiently reduce pollution only if they are initially distributed to the firms that can regulator pollution at the lowest cost.
D. To set the quantity of pollution with tradable pollution permits, the regulator must know everything about the demand for pollution rights.
E. Pigovian taxes are more likely to reduce pollution to a targeted amount than tradable pollution permits.

A. there are no transaction costs.
B. each affected party has equal power in the negotiations.
C. the party affected by the externality has the initial property right to be left alone.
D. There are a large number of affected parties.
E. the government requires them to negotiate with each other