econ quiz 10 – Flashcards
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A positive externality will cause a market to produce
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less than is socially desirable.
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Dog owners do not bear the full cost of the noise their barking dogs create and often take too few precautions to prevent their dogs from barking. Local governments address this problem by
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making it illegal to "disturb the peace."
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According to the Coase theorem, in the presence of externalities
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private parties can bargain to reach an efficient outcome.
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A cost imposed on someone who is neither the consumer nor the producer is called a
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negative externality.
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With pollution permits, the supply curve for pollution rights is
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perfectly inelastic.
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A corrective tax
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a.
can be used to internalize a negative externality.
b.
imposed on sellers shifts the supply curve to the left.
c.
imposed on buyers shifts the demand curve to the left.
d.
All of the above are correct.
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A command-and-control policy is another term for a
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government regulation.
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According to the Coase theorem, private markets will solve externality problems and allocate resources efficiently as long as
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private parties can bargain with sufficiently low transaction costs.
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Two types of private solutions to the problem of externalities are
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charities and the Golden Rule.
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By allowing an income-tax deduction for charitable contributions, the government
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encourages a private solution to a particular positive-externality problem.
