Econ 102 Final 1-8 Flashcards
Three Externalities associated with driving cars and trucks
Congestion
Accidents
Pollution
Some policies toward externalities provide incentives so that private decision makers will choose to solve the problem on their own. What name do we use for these types of policies?
Market Based Policies
- Using a supply and demand diagram, demonstrate how a negative externality leads to market inefficiency. How might the government help to eliminate this inefficiency?
When the neg externality exists, the supply curve is less than
the social cost, governments can help eliminate this by taxing
the product.
- Using a supply and demand diagram, demonstrate how a positive externality leads to market inefficiency. How might the government help to eliminate this inefficiency?
When the pos externality exists, the demand curve is less than the social
value, so government can help by subsidizing the product.
- An example of a private solution to externalities is charities. The government encourages this private solution by allowing ___________ .
Tax deducting for charitable donations
- As a means of dealing with pollution, do economists generally prefer corrective taxes or do they prefer regulations?
Economist prefer corrective taxes to regulations
Scenario 11-3
Consider the following goods:
- a fish fillet served at a restaurant
- fish in the ocean
- exotic fish in a huge aquarium in a privately-owned building
- Refer to Scenario 11-3. Which of these goods is the best example of a private good? Briefly explain.
Fish fillet, since its excludable and rivals in consumption
Scenario 11-3
Consider the following goods:
- a fish fillet served at a restaurant
- fish in the ocean
- exotic fish in a huge aquarium in a privately-owned building
- Refer to Scenario 11-3. Which of these goods is the best example of a club good? Briefly explain.
Exotic fish, viewing the fish is excludable but it’s
non-rivals in consumption
