Chapter 17

Question 1

Marginal social cost of pollution

Answer 1

The additional cost imposed on society as a whole by an additional unit of pollution

Question 2

Marginal social benefit of pollution

Answer 2

The additional gain to society as a whole from an additional unit of pollution

Question 3

Socially optimal quantity of pollution

Answer 3

The quantity of pollution that society would choose if all the costs and benefits of pollution were fully accounted for

Question 4

External cost

Answer 4

An uncompensated cost that an individual or firm imposes on others

Question 5

External benefit

Answer 5

A benefit that an individual or firm confers on others without receiving compensation

Question 6

Externalities

Answer 6

external costs and benefits

Question 7

external costs =

Answer 7

negative externalities

Question 8

external benefits =

Answer 8

positive externalities

Question 9

Coase theorem

Answer 9

Even in the presence of externalities an economy can always reach an efficient solucient as long as transaction costs are suffireintly low

Question 10

transaction costs

Answer 10

the costs to individuals to making a deal

Question 11

Internalize the externality

Answer 11

When individuals take external costs or benefits into account

Question 12

environmental standards

Answer 12

Rules that protect the environment by specifying actions by producers and consumers

Question 13

emissions tax

Answer 13

A tax that depends on the amount of pollution a firm produces

Question 14

Pigouvian taxes

Answer 14

Taxes designed to reduce external costs

Question 15

Tradable emissions permits

Answer 15

Liscences to emit limited quantities of pollutants that can be bought and sold by polluters

Question 16

technology spillover

Answer 16

An external benefit that results when knowledge spreads among individuals and firms

Question 17

Marginal social benefit of a good or activity

Answer 17

Equal to the marginal benefit that accrues to consumers plus its marginal external benefit

Question 18

Pigouvian subsidy

Answer 18

A payment designed to encourage activites that yield external benefits

Question 19

industrial poicy

Answer 19

A policy that supports industries believed to yield positive externalities

Question 20

Network externality

Answer 20

A good is subject to this when the value of the good to an individual is greater when a large number of other people also use the good

Question 21

positive feedback

Answer 21

When success breeds greater success and failure breeds failure