ECON 1116 Chapter Notes - Chapter 10-11: Private Good, Excludability, Economic Equilibrium

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greenporcupine206

26 Jan 2015

School

Northeastern University

Department

Economics

Course

ECON 1116

Professor

Koskinen

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Document Summary

The uncompensated impact of one person"s actions on the well-being of a bystander. The market equilibrium is not efficient when there are externalities. The government can make certain behaviors either required or forbidden: corrective tax. Induce suppliers to take account of the social costs that arise from a negative externality: pollution. 0 pollution best solution: internalizing the externality. Altering incentives so that people take account of the external effects of their actions. Development and dissemination of technological advances, leading to higher productivity: subsidy. The property of a good whereby a person can be prevented from using it: rivalry in consumption: The property of a good whereby one person"s use diminished other people"s use: private goods: You don"t get one unless you pay, and once you get it, you are the only person who benefits: public goods: Clean air and water, congested roads, fish: club goods (natural monopoly): Person who receives the benefit of a good but avoids paying for it.

Related Questions

In an article in the agriculture magazine Choices, Oregon State University economist JunJie Wu made the following observation about the conversion of farmland to urban development:

Land use provides many economic and social benefits but often comes at a substantial cost to the environment. Although most economic costs are figured into land-use decisions, most environmental externalities are not. These environmental 'externalities" cause a divergence between private and social costs for some land uses, leading to an inefficient land allocation. For example, developers may not bear all the environmental and infrastructural costs generated by their projects. Such market failures provide a justification for private conservation efforts and public land use planning and regulation.

Source: JunJie Wu, "Land Use Changes: Economic, Social, and Environmental Impacts," Choices, Vol. 23, No. 4, Fourth Quarter 2008, pp. 6-10.

By market failure, the author means:

(i) benefiting from a good without paying for it.

(ii) a situation that occurs when one person's consumption of a unit of a good means no one else can consume it.

(iii) a situation in which the market fails to produce an efficient level of output.

(iv) a situation in which a benefit is present that affects someone who is not directly involved in the consumption of a good or service.

(v) the tendency for a common resource to be underused.

cyanhound711

2a)

A market in which there are neither external benefits nor external costs is:

Select one:

a. efficient.

b. inefficient.

c. efficient and equitable.

d. impossible.

2b)

According to the special-interest theory of government, government officials and policymakers:

Select one:

a. are assumed to maximize social good.

b. tend to listen to small groups of people who contribute money to their political campaigns.

c. manage resources to maximize efficiency.

d. have a strong incentive to ensure that society's members equally benefit from a project.

2c)

Scientific research is subsidized by the government because

Select one:

a. it yields benefits to consumers and producers who did not participate in the research.

b. researchers are under-paid by private firms, so the government must make up the difference.

c. much scientific research takes place at state-funded universities.

d. scientific research has no market value so would not be undertaken without government intervention.

2d)

The forces of supply and demand will provide a quantity that is

Select one:

a. less than the efficient quantity if a good generates external benefits.

b. more than the efficient quantity if a good generates external benefits.

c. exactly the efficient quantity if a good generates external benefits.

d. either more than or less than the efficient quantity if a good generates external benefits. It is impossible to know whether it will be too much or too little without more information.

peachmosquito288

home / study / business / economics / questions and answers / Question 1 Which Of The Following Is The Best Example ... Question: Question 1 Which of the following is the best exam... Bookmark Question 1 Which of the following is the best example of a positive externality? A car company lays off 10,000 employees in order to cut costs. An individual drives a large SUV, which increases the amount of greenhouse gases in the atmosphere. An individual smokes in a restaurant, which bothers other patrons. A child is vaccinated against a disease, which reduces the probability that other children will catch the disease. 4 points Question 2 As a result of a negative externality, the market equilibrium quantity is too ______ compared to the socially optimal quantity. As a result of a positive externality, the market equilibrium quantity is too ______ compared to the socially optimal quantity. high; high. low; low. high; low. low; high. 4 points Question 3 Based on the diagram below, the deadweight loss area associated with the market equilibrium equals: Week06_graph1.jpg $10 $50 $80 $1,000 4 points Question 4 A firm's accounting profit is given by total revenue: less implicit costs. less explicit costs. less economic profit. less implicit and explicit costs. 4 points Question 5 Suppose an activity has a private cost equal to $30 and a private benefit equal to $30. The associated social cost equals $35 and the social benefit equals $30. Which of the following statements is true about this activity? There is a negative externality associated with this activity but not a positive externality. There is a positive externality associated with this activity but not a negative externality. There is both a positive and a negative externality associated with this activity. There is neither a positive nor a negative externality associated with this activity. 4 points Question 6 The Coase Theorem implies that: the efficient level of an externality is generally zero. private individuals living in market economies should not be concerned with externalities. government intervention is not always needed to arrive at the efficient level of an externality. government laws are unnecessary. 4 points Question 7 An industry in which a small number of large firms sell products that are either close or perfect substitutes is: perfectly competitive. monopolistically competitive. an oligopoly. a monopoly. 4 points Question 8 When a negative externality is present in a market: a tax can increase the level of economic surplus. the social benefits are greater than the private benefits. there is generally too little of the good produced by private markets. the government should ensure that there are zero external costs associated in all markets. 4 points Question 9 In the presence of a positive externality, the government can arrive at the socially optimal output level by: paying producers a subsidy equal to the amount of social benefits associated with the activity. charging producers a tax equal to the amount of social costs associated with the activity. paying producers a subsidy equal to the amount of external benefits associated with the activity. charging producers a tax equal to the amount of external costs associated with the activity. 4 points Question 10 The tragedy of the commons is that: too few individuals have access to high quality healthcare. common people overconsume public goods. the quality of life for lower income people is generally lower than that of higher income people. a resource with no price tends to be exploited until its marginal benefit falls to zero. 4 points Question 11 One potential remedy to the tragedy of the commons is to: never allow a single individual to consume more than one percent of the common resource. criminalize the usage of common resources. allow individuals to use a common resource as long as they receive some benefit from doing so. place a common resource under private ownership. 4 points Question 12 As a result of a positional externality: contestants have a tendency to invest in a series of mutually offsetting investments in performance enhancement. there is generally an underinvestment in performance enhancement. the market price of performance enhancement materials is too high. the quality of performance in competitive situations is lower than the socially optimal level. 4 points Question 13 Which of the following statements is true regarding health insurance? Economics shows that all health related procedures should be free to individuals because the health of an individual is priceless. Total economic surplus would be larger if individuals faced an incentive to only use services when the benefit exceeds their costs. Health maintenance organizations provide an incentive for doctors to prescribe expensive nonessential services. First dollar insurance coverage has likely had very little to do with rising healthcare expenditures since World War II. 4 points Question 14 A strategy that yields a higher payoff no matter what the other players in the game choose is known as a: prisoner's strategy. dominated strategy. dominant strategy. Nash strategy.

ECON 1116 Chapter Notes - Chapter 10-11: Private Good, Excludability, Economic Equilibrium

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