Externality & Internality

A. reduce the incentive for technological innovations to further reduce pollution.
B. set the price of pollution.
C. determine the demand for pollution rights.
D. Set the quantity of pollution

A. a tradeable pollution permits.
B. an attempt to internalize a positive externality
C. an application of the Coase theorem
D. an attempt to internalize a negative externality.

A. Thomas will pay Roberto between €100 and €150 and Roberto will continue to play loud music
B. Roberto will pay Thomas €150 and Roberto will continue to play loud music
C. Thomas will pay Roberto between €100 and €150 and Roberto will stop playing loud music
D. Roberto will pay Thomas €100 and Roberto will stop playing loud music

A. costs incurred due to lawyers’ fees
B. costs incurred to reduce the pollution
C. costs incurred to enforce the agreement
D. costs incurred due to a large number of parties affected by the externality
E. All of these answers are considered transaction costs

A. there are no transaction costs.
B. each affected party has equal power in the negotiations.
C. the party affected by the externality has the initial property right to be left alone.
D. There are a large number of affected parties.
E. the government requires them to negotiate with each other

A. a positive externality
B. a technology spillover
C. an efficient market outcome.
D. a negative externality

A. have the government take over the production of the good causing the externality
B. ban the production of all goods creating negative externalities
C. tax the good
D. subsidize the good

A. optimal quantity to exceed the equilibrium quantity.
B. equilibrium quantity to be either above or below the optimal quantity
C. equilibrium quantity to equal the optimal quantity
D. equilibrium quantity to exceed the optimal quantity

A. a social cost curve that is below the supply curve (private cost curve) for a good
B. none of these answers
C. a social cost curve that is below the supply curve (private cost curve) for a good
D. a social value curve that is above the demand curve (private value curve) for a good

A. Pigouvian taxes, command-and-control policies, tradable pollution permits.
B. tradable pollution permits, Pigouvian taxes, command-and-control policies
C. tradable pollution permits command-and-control policies, Pigovian taxes.
D. command-and-control policies, tradable pollution permits, Pigovian taxes.
E. They would all rank equally high because the same result can be obtained from any one of the policies