Explanation Explanation for correct answer: A production quota is allocated to individual producers, so each producer has its own quota and it is ahigher limit to the quantity of goods that may be produced in a particular period. The marginal external cost of fishcatching is the cost per additional ton that one fisher's production imposesto all other fishers. So, if they both are equal, the efficient use of a common resource cannot be achieved. Explanation for incorrect answers: B. Individual transferable quotas that total the efficient quantity − An individual transferable quota is where producers are difficult to monitor or where marginal cost varies across producers.An individual transferable quota is a limit on the production allocated to a person who is free to transfer or sell the quota to another person...

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Foundations of Economics (8th Edition)

8th Edition

ISBN: 9780134486819

Author: Robin Bade, Michael Parkin

Publisher: PEARSON

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Chapter 11, Problem 7MCQ

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Chapter 11, Problem 6MCQ

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Which of the following goods or services are nonexcludable? police protection streaming music from satellite transmission programs roads primary education cell phone service
Identify the following situations as an example of a negative or a positive externality: You are a birder (bird watcher), and your neighbor has put up several birdhouses in the yard as well as planting trees and flowers that attract birds. Your neighbor paints his house a hideous color. Investments in private education raise your countrys standard of living. Trash dumped upstream flows downstream right past your home. Your roommate is a smoker, but you are a nonsmoker.
Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost?
(External Costs with Variable Technology) Think of an industry that pollutes the water and has access to variable technology for reducing that pollution. Graphically illustrate and explain the impact of each of the following, other things constant, on the optimal level of water quality: a. New evidence is discovered about a greater risk of cancer from water pollution. b. The cost of pollution-control equipment increases. c. A technological improvement reduces the cost of pollution control.
Will the demand for borrowing and investing in R&D be higher or lower if there are no external benefits?
A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwoods forest and grow com, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between T and R, decide which one is better. Why? In the choice between T and S, can you say which one is better, and why? If you had to guess, which choice would you think is more likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?
Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Fe and Qe. On the graph, shade in the deadweight loss at the market output.
Education provides both private benefits to those who receive it and broader social benefits for the economy as a whole. Think about the types of policies a government can follow to address the issue of positive spillovers in technology and then suggest a parallel set of policies that governments could follow for addressing positive externalities in education.
Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and output. a. Assuming that the production of televisions generates external costs, illustrate the effect of the producers being forced to pay a tax equal to the external costs generated, and indicate the equilibrium output. b. If instead of generating external costs, television production generates external benefits, illustrate the effect of the producers being given a subsidy equal to the external benefits generated, and indicate the equilibrium output.

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