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ECO 2302 Study Guide - Quiz Guide: Coase Theorem, Efficient-Market Hypothesis, Marginal Utility

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emilypena887
22 Nov 2021
School
UHD
Department
Economics
Course
ECO 2302
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Document Summary

Lighthouses: free riding is a very big problem when goods are: nonexcludable and nonrival, the cost to clean up a chemical spill that has seeped into local streams is ,000, and the estimated benefit is ,000. Property rights: an outdoor concert venue in a neighborhood produces a lot of noise pollution on the weekends. The venue owners or the homeowners must own the air: an outdoor concert venue in a neighborhood produces a lot of noise pollution on the weekends.

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Related Questions

Answer the following problem based on Externalities and Public Goods that we discussed in class:

Rival

Non-Rival

Excludable

Non-Excludable

Fill in the table to represent each of the four types of goods. Use examples to earn full credit.

What is the difference between a positive and a negative externality? Give examples to earn full credit.

How does the free rider problem relate to goods that non-excludable with non-rivalry?

How does moral hazard relate to goods that are excludable with non-rivalry?

How does the marginal-cost marginal-benefit rule apply to avoid demand-side and supply-side market failures?

What are the two characteristics that differentiate private goods from public goods?
 
(i) Rivalry and excludability
(ii) Negative externality and positive externality
(iii) Marginal cost and marginal benefit
(iv) Ownership and usage 

Examine the following marginal costs and marginal benefits associated with air cleanliness in a given locale:

Quantity of clean air %

Marginal cost $

Marginal benefit $

0

50,000

600,000

20

150,000

360,000

40

200,000

200,000

60

300,000

150,000

80

400,000

120,000

100

infinite

0

a. How do we determine the optimal quantity of clean air?

b. What is the optimal degree of air cleanliness for this example?

c. What is the optimal degree of air pollution for this example?

d. Suppose that a state provides subsidies for a company to build i. plants that contribute to air pollution. Cleaning up this pollution causes the marginal cost of air cleanliness to rise by $210,000 at each degree of air cleanliness. What is the optimal degree of air cleanliness after this change?

e. Why would we not just want the per cent of pollution to be zero?