Question

In: Economics

1. When the social cost of producing a good is higher than the private cost, then...

1. When the social cost of producing a good is higher than the private cost, then

A) positive externalities exist.

B) there are no externalities.

C) negative externalities exist.

7. If pollution exist in a market,

A) the supply curve would be lower than optimum and the equilibrium quantity higher than optimum.

B) the supply curve would be higher than optimum and the equilibrium quantity lower than optimum.

C) the supply curve would be higher than optimum (efficient) and the equilibrium quantity higher than optimum.

9. Which of the following are examples of command-and-control regulation?

A) The U.S. government makes subsidies available to the manufacturing industries whose CO2 emissions exceed certain levels to install equipment to scrub the CO2 from their emissions.

B) The U.S. government determines solar panels are cleaner energy and subsidizes their use to reduce CO2 emissions from manufacturing industries.

C) The U.S. government requires firms to install antipollution equipment to improve air and water quality.

10. What are the benefits of clearly established property rights?

A) Responsible parties are identified and it helps increase negative externalities.

B) Business are incentivized to comply with regulations.

C) Responsible parties are identified and it helps reduce negative externalities.

Expert Solution

1> C) negative externalities exist.

If the social cost is higher than the private cost, it implies that there are costs which are not accounted by the firm. So, it is a cost to the society which is a negative externality.

2> A) the supply curve would be lower than optimum and the equilibrium quantity higher than optimum.

Pollution has negative externality, thus the MSC will be above the supply curve and optimal output should also be lower.

3> C) The U.S. government requires firms to install antipollution equipment to improve air and water quality.

A command and control policy is where firms are instructed to do something, here the firms are asked to install an equipment which must be followed, violators will be prosecuted.

4> C) Responsible parties are identified and it helps reduce negative externalities.

If property rights is defined, then externality is causing loss to another party, so they have to pay them back or the harmed party can take the other party to courtroom.

Rahul Sunny answered 6 months ago

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