Question 1

Your favorite holiday is Halloween and each year you decorate your yard with pumpkins, skeletons, and tombstones, and you install a noise machine which blasts haunting sounds 24 hours a day. It is such a spectacle that hundreds of people drive by your house each day to gawk at the display. The noise and traffic disturb your neighbors who sue you, and you are required to take down your display permanently. This is an example of

Accepted Answer

This scenario is an example of an injunction, which is a court order requiring a party to do or cease doing a specific action. In this case, the court orders the removal of the Halloween display due to the disturbance it causes to the neighbors.

Question 2

Refer to the data provided in Table 16.3 below to answer the following question(s).
Table 16.3 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.3
 \[\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \
\hline \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm A }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm B }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} \
\hline 1 & \$ 8 & \$ 8 & 1 & \$ 16 & \$ 16 \
\hline 2 & 12 & 20 & 2 & 24 & 40 \
\hline 3 & 18 & 38 & 3 & 32 & 72 \
\hline 4 & 26 & 64 & 4 & 40 & 112 \
\hline 5 & 36 & 100 & 5 & 48 & 160 \
\hline
\end{array}\]
-Refer to Table 16.3. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are not allowed to trade permits, what is the total cost of the pollution reduction?

Accepted Answer

The answer of Refer to the data provided in Table...

Question 3

When the government pays for childhood vaccinations, it is

Accepted Answer

Vaccinations create external benefits by reducing the spread of diseases to others in the community. When the government pays for these vaccinations, it is subsidizing these external benefits, encouraging more people to get vaccinated and thus increasing the overall health of the population.

Question 4

Direct regulation of externalities take place at the ________ level.

Accepted Answer

Direct regulation of externalities can occur at the federal, state, and local levels, as different levels of government may implement policies or regulations to address specific externalities relevant to their jurisdictions.

Question 5

You accidentally jump the curb and run over your neighbor's extensive garden gnome collection. Your neighbor sues you and you are required to pay $3,000 to replace the gnomes. This is an example of

Accepted Answer

This is an example of a liability rule, where the party responsible for the damage (in this case, running over the garden gnomes) is required to compensate the affected party financially.

Question 6

My roommate ________. This is an example of an external benefit.

Accepted Answer

An external benefit occurs when a third party gains a benefit from an action they are not directly involved in. In this case, the roommate cleaning up after his dog and ensuring it doesn't harm the ferrets is an external benefit to the ferrets' owner, as it reduces potential harm or inconvenience without direct involvement or effort from the ferret owner. Choices A, B, and C describe actions that are more likely to be considered nuisances or external costs rather than benefits.

Question 7

Refer to the data provided in Table 16.4 below to answer the following question(s).
Table 16.4 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.4
 \[\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \
\hline \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm A }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm B }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} \
\hline 1 & \$ 2 & \$ 2 & 1 & \$ 16 & \$ 16 \
\hline 2 & 6 & 8 & 2 & 24 & 40 \
\hline 3 & 12 & 20 & 3 & 32 & 72 \
\hline 4 & 20 & 40 & 4 & 40 & 112 \
\hline 5 & 30 & 70 & 5 & 48 & 160 \
\hline
\end{array}\]
-Refer to Table 16.4. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits and all possible trades are made, Firm A will reduce its pollution by a total of ________ units.

Accepted Answer

The answer of Refer to the data provided in Table...

Question 8

Refer to the data provided in Table 16.4 below to answer the following question(s).
Table 16.4 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.4
 \[\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \
\hline \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm A }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm B }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} \
\hline 1 & \$ 2 & \$ 2 & 1 & \$ 16 & \$ 16 \
\hline 2 & 6 & 8 & 2 & 24 & 40 \
\hline 3 & 12 & 20 & 3 & 32 & 72 \
\hline 4 & 20 & 40 & 4 & 40 & 112 \
\hline 5 & 30 & 70 & 5 & 48 & 160 \
\hline
\end{array}\]
-Refer to Table 16.4. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits and all possible trades are made, Firm B will reduce its pollution by a total of ________ unit(s).

Accepted Answer

The answer of Refer to the data provided in Table...

Question 9

Empirically measuring the marginal social benefit of pollution is ________ and empirically measuring the marginal social cost of pollution is ________.

Accepted Answer

Both the marginal social benefit and the marginal social cost of pollution are difficult to measure empirically due to the complex and often indirect ways in which pollution impacts society and the environment.

Question 10

Refer to the data provided in Table 16.3 below to answer the following question(s).
Table 16.3 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.3
 \[\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \
\hline \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm A }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm B }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} \
\hline 1 & \$ 8 & \$ 8 & 1 & \$ 16 & \$ 16 \
\hline 2 & 12 & 20 & 2 & 24 & 40 \
\hline 3 & 18 & 38 & 3 & 32 & 72 \
\hline 4 & 26 & 64 & 4 & 40 & 112 \
\hline 5 & 36 & 100 & 5 & 48 & 160 \
\hline
\end{array}\]
-Refer to Table 16.3. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits, how many permits will be traded between the two firms?

Accepted Answer

Firm B has a higher marginal cost (MC) for reducing pollution at every level compared to Firm A. This means it is cheaper for Firm A to reduce pollution than it is for Firm B. Therefore, Firm B, which faces higher costs for reducing pollution, will find it more economical to buy a permit from Firm A, allowing Firm B to pollute more while Firm A reduces its pollution further. Since the government caps emissions at 2 units per firm and wants to reduce total pollution to 4 units, only one permit needs to be traded for both firms to meet the new regulation economically. Firm A will reduce its pollution further (which is cheaper for it to do) and sell one permit to Firm B, who finds it more expensive to reduce pollution.

Question 11

As pollution emission levels increase, the marginal social benefit of pollution

Accepted Answer

The marginal social benefit of pollution decreases as pollution emission levels increase because the additional harm caused by pollution outweighs any benefits, leading to negative impacts on health, environment, and overall social welfare.

Question 12

Refer to the data provided in Table 16.4 below to answer the following question(s).
Table 16.4 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.4
 \[\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \
\hline \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm A }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm B }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} \
\hline 1 & \$ 2 & \$ 2 & 1 & \$ 16 & \$ 16 \
\hline 2 & 6 & 8 & 2 & 24 & 40 \
\hline 3 & 12 & 20 & 3 & 32 & 72 \
\hline 4 & 20 & 40 & 4 & 40 & 112 \
\hline 5 & 30 & 70 & 5 & 48 & 160 \
\hline
\end{array}\]
-Refer to Table 16.4. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits, what is the total cost of the pollution reduction?

Accepted Answer

The total cost of pollution reduction when firms are allowed to trade permits is calculated by adding the total cost (TC) of reducing pollution for each firm to the desired level. Firm A reduces pollution by 3 units (from 5 to 2), which costs $20 according to the table. Firm B also reduces pollution by 3 units, which costs $72. Therefore, the total cost is $20 (for Firm A) + $72 (for Firm B) = $92. However, there seems to be a misunderstanding in the calculation or the presentation of options, as the correct calculation based on the provided table data should result in $92, not one of the provided options. Given the options, the closest or intended correct answer might be a mistake in the question or answer choices.

Question 13

Refer to the information in Figure 16.5 below to answer the question(s) that follow.  Figure 16.5
Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free.
-Refer to Figure 16.5. Before any tax on pollution is imposed, Alpha Chemicals is emitting ________ tons of pollution.

Accepted Answer

The question implies that the figure shows the level of pollution before any tax is imposed, and typically, without regulation, firms emit at their maximum capacity, which is often the highest value given.

Question 14

Governments often ________ activities that generate external ________.

Accepted Answer

Governments often tax activities that generate external costs to discourage those activities and to help cover the societal costs they impose.

Question 15

________ is (are) an example of selling externality rights.

Accepted Answer

Auctioning the right to have a garage sale each year is an example of selling externality rights, as it involves the sale or auction of permits allowing individuals to engage in activities that could have external effects on the community.

Question 16

As pollution emission levels increase, the marginal social cost of pollution

Accepted Answer

The marginal social cost of pollution increases as pollution emission levels increase because the additional damage caused by an extra unit of pollution becomes greater when pollution levels are already high.

Question 17

Refer to the data provided in Table 16.4 below to answer the following question(s).
Table 16.4 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.4
 \[\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \
\hline \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm A }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm B }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} \
\hline 1 & \$ 2 & \$ 2 & 1 & \$ 16 & \$ 16 \
\hline 2 & 6 & 8 & 2 & 24 & 40 \
\hline 3 & 12 & 20 & 3 & 32 & 72 \
\hline 4 & 20 & 40 & 4 & 40 & 112 \
\hline 5 & 30 & 70 & 5 & 48 & 160 \
\hline
\end{array}\]
-Refer to Table 16.4. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are not allowed to trade permits, what is the total cost of the pollution reduction?

Accepted Answer

If firms are not allowed to trade permits and each must reduce their pollution to 2 units (a reduction of 3 units for each firm from their original 5 units), we look at the Total Cost (TC) of reducing pollution for each firm by 3 units. For Firm A, the TC is $20, and for Firm B, the TC is $72. Adding these together gives us $92 as the total cost of pollution reduction.

Question 18

At the optimum, the marginal social benefit from pollution emissions

Accepted Answer

At the optimum, the marginal social benefit from pollution emissions will equal the marginal social cost of pollution emitted. This balance ensures that the level of pollution is socially efficient, meaning that the cost of reducing pollution further would outweigh the benefits.

Question 19

Refer to the data provided in Table 16.3 below to answer the following question(s).
Table 16.3 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.3
 \[\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \
\hline \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm A }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm B }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} \
\hline 1 & \$ 8 & \$ 8 & 1 & \$ 16 & \$ 16 \
\hline 2 & 12 & 20 & 2 & 24 & 40 \
\hline 3 & 18 & 38 & 3 & 32 & 72 \
\hline 4 & 26 & 64 & 4 & 40 & 112 \
\hline 5 & 36 & 100 & 5 & 48 & 160 \
\hline
\end{array}\]
-Refer to Table 16.3. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits, what is the total cost of the pollution reduction?

Accepted Answer

The total cost of pollution reduction is the sum of the total costs (TC) for each firm to reduce their pollution to 2 units. For Firm A, reducing pollution by 3 units costs $38, and for Firm B, reducing pollution by 3 units costs $72. The sum is $38 + $72 = $110. However, if firms are allowed to trade permits, Firm A can reduce its pollution by 3 units (to 2 units) at a cost of $38, and Firm B can buy permits instead of reducing its own pollution, avoiding the higher cost of $72 for reducing 3 units. The most cost-effective strategy involves Firm A reducing more of its pollution because it has lower marginal costs for pollution reduction. The total cost of $110 initially calculated does not account for the cost-saving mechanism of permit trading, which allows for a more efficient allocation of pollution reduction efforts. Given the information, the correct calculation of the total cost with permit trading cannot be directly determined from the provided data, indicating a need for clarification or additional information.

Question 20

Refer to the data provided in Table 16.4 below to answer the following question(s).
Table 16.4 shows the situation facing two firms, both of which are polluting. Assume that each firm emits 5 units of pollution.
Table 16.4
 \[\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Firm A } & \text { Firm A } & \text { Firm A } & \text { Firm B } & \text { Firm B } & \text { Firm B } \
\hline \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm A }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm A }
\end{array} & \begin{array} { c } 
\text { Reduction of } \
\text { Pollution by } \
\text { Firm B }
\end{array} & \begin{array} { c } 
M C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} & \begin{array} { c } 
T C \text { of } \
\text { reducing } \
\text { pollution for } \
\text { Firm B }
\end{array} \
\hline 1 & \$ 2 & \$ 2 & 1 & \$ 16 & \$ 16 \
\hline 2 & 6 & 8 & 2 & 24 & 40 \
\hline 3 & 12 & 20 & 3 & 32 & 72 \
\hline 4 & 20 & 40 & 4 & 40 & 112 \
\hline 5 & 30 & 70 & 5 & 48 & 160 \
\hline
\end{array}\]
-Refer to Table 16.4. Suppose the government wants to reduce the total amount of pollution from the current level of 10 to 4. To do this, the government caps each firm's emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade permits, how many permits will be traded between the two firms?

Accepted Answer

Firm B has a higher marginal cost (MC) of reducing pollution at every level compared to Firm A. This means it is cheaper for Firm A to reduce pollution than it is for Firm B. Therefore, Firm B, facing higher costs for reducing pollution, will find it more economical to buy pollution permits from Firm A, rather than reducing its own emissions. Since the government wants to reduce the total pollution to 4 units, and each firm is initially capped at 2 units, Firm B will seek to buy permits from Firm A to avoid the higher costs of reducing its own emissions. Firm A, with lower costs of reduction, will reduce its pollution and sell its permits to Firm B.

Quiz 16: Externalities, Public Goods, and Common Resources

When the government pays for childhood vaccinations, it is

Direct regulation of externalities take place at the ________ level.

You accidentally jump the curb and run over your neighbor's extensive garden gnome collection. Your neighbor sues you and you are required to pay $3,000 to replace the gnomes. This is an example of

My roommate ________. This is an example of an external benefit.

Empirically measuring the marginal social benefit of pollution is and empirically measuring the marginal social cost of pollution is .

As pollution emission levels increase, the marginal social benefit of pollution

Governments often activities that generate external .

________ is (are) an example of selling externality rights.

As pollution emission levels increase, the marginal social cost of pollution

At the optimum, the marginal social benefit from pollution emissions