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Quiz 1 ECON 145
Terms in this set (18)
A market in which the prices understate the value of the full range of services provided by environmental assets is considered missing. T or F?
If a price does not exist for an environmental asset (such as the existence of sea turtles), this is called a missing market. T or F?
Market failures by definition result in a Pareto inefficient allocation. What is a Pareto inefficient allocation?
An allocation that can be reallocated to make someone better off without making anyone worse off.
The difference between a pecuniary and a technological externality is that technological externalities are represented as shifts in the utility or production function, whereas pecuniary externalities only shift the market price (movement along the curve). T or F?
The Social Cost is defined as:
The cost faced by all of society including the private consumer/producer.
If the marginal social cost exceeds the marginal private cost, this will result in overproduction (Q optimum < Q market). T or F?
Which of the following is NOT an example of "Internalizing the Externality"?
The government promises to fine anyone that kills a whale in violation of the international whaling laws.
Because long-line fishing kills hundreds of sea-turtles as bycatch (negative externality), the optimal outcome will occur when there is no long-line fishing. T or F?
Which of the following is NOT a problem with command-and control policies
Although it eliminates the deadweight loss, the government gets to keep all of the generated surplus. This leaves consumers and producers no better off.
Which of the following is an example of a Pigouvian tax?
Fishing vessels are taxed $2000 per ton of swordfish caught.
The economics department has a weekly lunch seminar in which a plate of cookies are provided. 1)Are the cookies excludable? 2)Are the cookies rivalrous? 3)Therefore, the plate of cookies would be considered a:
Because one cannot control who consumes a non-excludable good, one cannot put a price on a non-excludable good. T or F?
The Free-Rider Problem is at its worst for what type of good?
Congestion at the weight room in RIMAC would not be considered a Technological Externality because it is the result of too many people, and is therefore not related to technology. T or F?
In the long-run, fishermen would all be better off if they reduced the amount they caught each year, but they do not reduce the catch because they have no incentive to do so. Why?
Because of the resource stock externality, they fail to take into account the damage that overfishing today has on future profits.
The Tragedy of the Commons occurs because the individual costs of exploiting the common resource are lower than the social cost. True or F?
Private firms underprovide public goods because the market price for any public good is zero, so they can't make a profit (or break even if the cost is positive) . T or F?
Total (or global) benefits are computed by taking the individual benefits and:
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