Question : 11) According to ________, in a market with an externality, : 1387494

11) According to ________, in a market with an externality, private parties would voluntarily negotiate an efficient outcome without government intervention.

A) A. C. Pigou

B) Adam Smith

C) Ronald Coase

D) John Maynard Keynes

12) Suppose a negative externality exists in a market. If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem,

A) an equitable solution can be reached only if property rights are assigned to the victims of pollution and not the polluters.

B) an equitable solution can be reached only if property rights are assigned to polluters and not to the victims of pollution.

C) an efficient solution can be reached regardless of the initial assignment of property rights.

D) government intervention is necessary to reach an efficient and equitable solution.

13) If the paint on your house was eaten away by the fumes from a factory nearby and you hired a lawyer to sue the polluting firm, your legal fees would be considered

A) external costs.

B) transaction costs.

C) marginal benefits.

D) social costs of the pollution.

14) Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes. According to the Coase theorem, government action is ________ to achieve an ________ amount of pollution.

A) necessary; equitable

B) necessary; efficient

C) not necessary; equitable

D) not necessary; efficient

15) Consider the following characteristics:

a.low transaction costs

b.small levels of pollution

c.high levels of pollution

d.clear assignment of property rights.

Which of the above are assumptions behind the Coase Theorem?

A) a, b, and d

B) a, c, and d

C) a and d

D) a only

16) Which of the following must be present to reach a private solution to an externality problem?

A) A majority of the parties affected by the externality must agree to a solution.

B) The transaction costs to negotiate a solution must be relatively low.

C) The total number of people, creators of the problem and those affected, must be relatively large to justify negotiating a solution.

D) The government must approve the solution for it to be a legal solution.

17) In the city of Alvarez, with the exception of guide dogs for blind people, all dogs are banned from its three public parks, regardless of whether the animals are leashed. Many residents are pushing for a change in policy. Canine lover Sara Northridge observed, “There are 800 or more homes here. There are three parks within 10 minutes, and almost everyone has a dog, but we can’t take our dogs there.” Others fear that allowing dogs would detract from their enjoyment of the parks. Tim Cortis retorted, “We’re not preventing dog lovers from enjoying the park, just come without your dog.” Which of the following is a way of dealing with the problem by assigning property rights to a particular group?

A) impose a two-tier entry fee system—a lower fee for non dog owners and a higher fee for dog owners

B) impose a fee only for dog owners to use the public parks; non dog owners do not pay a fee

C) dedicate some parks, or at least one park, exclusively for the use of visitors bringing dogs to the park

D) allow dog owners to bring their dogs to the park but insist that they keep watch over their dogs

18) Economists Kenneth Chay and Michael Greenstone find that in the two years following the passage of the Clean Air Act of 1970, the sharp reduction in air pollution also led to a decline in infant deaths. Although this and other studies provide compelling evidence of the link between pollution and infant health, it is not clear that reductions from the much lower levels of ambient pollution today would have the same effect. Which of the following reasons could explain this?

A) The cost of pollution abatement today is much higher than it was in the 1970s. Thus, it would be far more costly to achieve the same level of benefit today as the benefit achieved in 1970.

B) When levels of pollution are high, the marginal benefit of reducing pollution also is high. It follows therefore that the benefit of reducing air pollution in 1970 would be much higher than the benefit from a proportional reduction in air pollution today when the level of pollution is much lower.

C) Today, the level of pollution is much higher. Therefore, it will take a much larger reduction in air pollution to reap similar benefits as it did in 1970.

D) When levels of pollution are high, the marginal benefit of reducing pollution is low. Therefore, it was necessary to significantly reduce air pollution in 1970 before benefits can be realized. Today, when the level of pollution is much lower, such drastic measures are unnecessary.

19) James Meade, who won the Nobel Prize in Economics in 1977, argued that positive externalities resulted from

A) reducing emissions of sulfur dioxide.

B) producing automobiles and automobile tires.

C) home owners in the Northeast moving to the South and Southwest United States.

D) apple growing and beekeeping.

20) In the United States, many beekeepers travel from state to state, renting out their bee colonies to farmers for pollination services. This is an example of

A) a Coasian solution to a positive externality problem.

B) a Pigovian solution to a positive externality problem.

C) a tradable exchange contract.

D) command and control policy.