Econ 40 Chapter 8

Benefits spill over to outside parties with ______.

• negative internalities

• positive internalities

• negative externalities

• positive externalities

Economists would say that a person who chooses not to become vaccinated against a contagious disease creates a ______.

• moral hazard

• free ride

• negative externality

• positive externality

If firms had to pay for the externalities they cause, the supply curve would ______.

• become inverted

• remain unaffected

• shift to the left

• shift to the right

The government could internalize a positive externality of consumption by providing ______.

• a technology spillover

• a moral hazard

• a subsidy

• an adverse selection

Gains in the attempt to eliminate pollution would probably be ______.

• steady as the effort continues

• the greatest in the early stages

• increasingly effective as more money is spent

• ineffective regardless of the level of effort

If there is no intervention in the market, what will polluters usually do?

• overproduce

• underproduce

• reach optimal production

• cease production altogether

Which approach is being used if the government requires furnace manufacturers to include components that make furnaces burn cleaner?

• signaling

• taxation

• regulation

• subsidization

Which of the following examples represents the transferrable pollution rights approach?

• Gordon’s Fertilizer receives a government payment for each purchase of an environmentally friendly nitrate it adds to its products.

• Layla’s Engines has to pay a tax when it purchases a polluting chemical used in its manufacturing process.

• Marti’s Charcoal is required to purchase a mandated filter to reduce its harmful smoke emissions.

• Ray’s Lubricants produces little pollution and sells another company its permit to produce a certain amount of additional pollution.

In the Coase theorem, property rights are ______.

• clearly defined

• undefined

• incorrectly defined

• abstractly defined

In the Coase theorem, externalities can be internalized if transaction costs are ______.

• flexible

• zero

• high

• low