Question 1

Imagine that a provincial government is considering the construction of a new office building to consolidate its operations.Its estimate of the total costs and the total benefits of building a 4- 6-,8-,or 10-story building is shown in the table below.(All figures are in millions of dollars. )

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Question 2

Draw a supply and demand graph on the below diagram that illustrates the market for pollution rights.Label the axes and curves.Then show what happens to price and quantity when the demand for pollution rights increases in the market.

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Question 3

What resource problem is created by negative externalities and what methods are suggested for dealing with this problem?

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Question 4

How could you use the Coase theorem to predict what would happen when smoke from a factory created dirty air and slightly acid rain for all the residents in the area in a one-kilometre radius of the plant?

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Question 5

What are negative and positive externalities? How do they affect supply and demand curves?

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Question 6

Describe how a market for externality rights would work in terms of supply and demand.

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Question 7

Evaluate: "Pollution is undesirable.Therefore,all pollution should be banned."

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Question 8

The next three questions refer to the below supply and demand graph for a public good.

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Question 9

What is the economic rationale for liability rules and lawsuits? What are the limitations with this approach?

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Question 10

Assume the atmosphere of an urban area is able to reabsorb 8,000 tonnes of pollutants per year.The schedule below shows the price polluters would be willing to pay for the right to dispose of 1 tonne of pollutants per year and the total quantity of pollutants they would wish to dispose of at each price.

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Question 11

The demand and supply in a market are represented by the equations P = 50 - .2Q_D and P = 20 + .3Q_S.A spillover cost in production equal to $2 per unit exists in this market. (a)What are the equilibrium price and quantity? (b)What are the optimal price and quantity? (c)How large must a specific tax in this market be to eliminate the market failure? Is the tax equal to the difference between the equilibrium price and the optimal price?

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Question 12

What are quasi-public goods and why does the government provide them?

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Question 13

Assume the atmosphere of an urban area is able to reabsorb 4,000 tonnes of pollutants per year.The schedule below shows the price polluters would be willing to pay for the right to dispose of 1 tonne of pollutants per year and the total quantity of pollutants they would wish to dispose of at each price.

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Question 14

The following table shows marginal costs and benefits of the optimal quantity of pollution abatement that will occur at a local factory.

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Question 15

The following table shows marginal costs and benefits of the optimal quantity of pollution abatement that will occur at a local factory.

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Question 16

How do direct controls and specific taxes affect negative externalities? Briefly explain in terms of supply and demand.

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Question 17

What resource problem is created by positive externalities and what methods are suggested for dealing with this problem?

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Question 18

Evaluate.Economy in government requires that government minimize its spending.

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Quiz 4: Market Failures: Public Goods and Externalities

Imagine that a provincial government is considering the construction of a new office building to consolidate its operations.Its estimate of the total costs and the total benefits of building a 4- 6-,8-,or 10-story building is shown in the table below.(All figures are in millions of dollars. )

Draw a supply and demand graph on the below diagram that illustrates the market for pollution rights.Label the axes and curves.Then show what happens to price and quantity when the demand for pollution rights increases in the market.

What resource problem is created by negative externalities and what methods are suggested for dealing with this problem?

How could you use the Coase theorem to predict what would happen when smoke from a factory created dirty air and slightly acid rain for all the residents in the area in a one-kilometre radius of the plant?

What are negative and positive externalities? How do they affect supply and demand curves?

Describe how a market for externality rights would work in terms of supply and demand.

Evaluate: "Pollution is undesirable.Therefore,all pollution should be banned."

The next three questions refer to the below supply and demand graph for a public good.

What is the economic rationale for liability rules and lawsuits? What are the limitations with this approach?

What are quasi-public goods and why does the government provide them?

The following table shows marginal costs and benefits of the optimal quantity of pollution abatement that will occur at a local factory.

The following table shows marginal costs and benefits of the optimal quantity of pollution abatement that will occur at a local factory.

How do direct controls and specific taxes affect negative externalities? Briefly explain in terms of supply and demand.

What resource problem is created by positive externalities and what methods are suggested for dealing with this problem?

Evaluate.Economy in government requires that government minimize its spending.