Question 1

To reduce pollution,economists generally prefer a corrective tax to a command-and-control policy because the same goals can be achieved but in an efficient manner with a corrective tax.

Accepted Answer

Corrective taxes provide economic incentives for firms to reduce pollution in the most cost-effective manner for their specific situation. This allows for greater flexibility and efficiency in achieving pollution reduction goals, as opposed to command-and-control policies that impose regulations and restrictions on firms.

Question 2

Explain why the socially optimal output is not always the same as the market output.

Accepted Answer

The answer of Explain why the socially optimal output is...

Question 3

All economists agree that to justify that market failure has occurred,it is sufficient to have the market choose an inferior product over a superior product.

Accepted Answer

Not all economists agree on a specific definition or criterion of market failure. While choosing an inferior product over a superior product may be one sign of market failure, it is not the only one, and some economists may have a different opinion or approach.

Question 4

Identify two activities that generate positive externalities and two activities that generate negative externalities. Be sure to explain why each activity you identified generates the type of externality you stated.

Accepted Answer

The answer of Identify two activities that generate positive externalities...

Question 5

Describe the Coase theorem and explain why it is significant in the analysis of externatility problems.

Accepted Answer

The answer of Describe the Coase theorem and explain why...

Quiz 31: Market Failure: Externalities, Public Goods, and Asymmetric Information

To reduce pollution,economists generally prefer a corrective tax to a command-and-control policy because the same goals can be achieved but in an efficient manner with a corrective tax.

Explain why the socially optimal output is not always the same as the market output.

All economists agree that to justify that market failure has occurred,it is sufficient to have the market choose an inferior product over a superior product.

Identify two activities that generate positive externalities and two activities that generate negative externalities. Be sure to explain why each activity you identified generates the type of externality you stated.

Describe the Coase theorem and explain why it is significant in the analysis of externatility problems.