Question 1

Three methods of dealing with externalities are direct regulation,incentive policies,and voluntary restrictions.Explain and evaluate each of these options.

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Question 2

One of the solutions to pollution that economists advocate more often than non-economists is a marketable certificate program.Explain how such a program would work,and why economists tend to favor such an approach.

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Question 3

What problems are associated with determining how much of a public good should be provided?

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Question 4

Describe how voluntary restrictions can be used to address externalities.What problem tends to arise with this method?

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Question 5

What is the difference between a negative and a positive externality? Give an example of each.

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Question 6

Why do information problems constitute market failures?

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Question 7

A government failure occurs when the government intervention in the market that was intended to correct a market failure actually makes the situation worse.Such a failure could occur for one or more of the following reasons:

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Question 8

The city of Spillsville is worried that its municipal landfill is going to fill up.As a result,the city's sanitation engineer has proposed two solutions:
Solution 1: Require each household to reduce its garbage disposal by 100 pounds per month.
Solution 2: Impose a tax of $.05 per pound of garbage that will overall result in the same decline in garbage disposal as Solution 1.
Which of the two solutions would an economist prefer to have implemented? Explain.

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Question 9

What are the three alternative methods of dealing with externalities? Briefly explain each one.

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Question 10

What is Pareto optimality? What are the three criticisms of using perfect competition as a benchmark to evaluate the society's goals?

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Question 11

Why can imperfect information lead to market failure? Explain the adverse selection problem and give an example.How could markets for information resolve this problem?

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Question 12

Explain what a public good is and give an example.What problems are associated with determining what is a public good and how much of a public good should be provided?

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Question 13

Should all professionals be licensed? Or only some? Discuss the argument for licensing and for the information alternative for one of these professions: 1.medical doctors,2.college professors,3.lawyers,4.auto mechanics,5.beauticians.Then choose one other profession,and briefly indicate how (if at all)the weight of the arguments would change.

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Question 14

What are three major sources of market failure?

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Question 15

Explain why incentive programs are more efficient than direct regulation as a means of eliminating the problems of externalities.

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Question 16

What is a public good? Give two examples of a public good.

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Question 17

What is an optimal policy? If a policy is not optimal,what does it imply in terms of utilization of resources?

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Question 18

What is a market failure? Why do market failures occur?

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Question 19

What are the arguments for and against government intervention to deal with information problems?

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Question 20

Why can imperfect information lead to market failure?

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