ECON 201 - Exam 2 - UTK – Bueckman questions with ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
verified detailed solutions ||//\\|| ||//\\||
Market Failure - correct answer✔✔When the market fails to allocate society's resources
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
efficiently
Externality Consumption - correct answer✔✔self-interested buyers and sellers neglect the
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
external costs of their actions ||//\\|| ||//\\|| ||//\\|| ||//\\||
Externalities - correct answer✔✔the effect of a market exchange on a third party who is ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
outside to the exchange
||//\\|| ||//\\|| ||//\\||
Negative Externalities effect on Market Quantity - correct answer✔✔if negative, the market
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
quantity is larger than socially desireable
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Positive Externality effect on Market Quantity - correct answer✔✔if positive, the market
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
quantity is smaller tan socially desireable
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
How to find social cost = - correct answer✔✔Private MC + Marginal External Cost
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Internalizing the Externality - correct answer✔✔altering incentives so people consider the ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
external effects of their actions ||//\\|| ||//\\|| ||//\\|| ||//\\||
Private Benefit/WTP - correct answer✔✔What a good is worth to the buyer
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
External benefit - correct answer✔✔the value of the positive impact on bystanders;
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
difference between new demand curve and old demand curve ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
, How to find social value - correct answer✔✔Private Value + external benefit
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Public Policies (4) - correct answer✔✔Command-and-Control
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Market-Based
Corrective taxes/subsidies ||//\\||
Tradeble Pollution Permits ||//\\|| ||//\\||
Command-and-control policies - correct answer✔✔regulate behavior directly ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
market-based policies - correct answer✔✔provide incentives to private decision-makers to ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
change behavior ||//\\||
Tradable Pollution permits - correct answer✔✔issued with a face "pollution value"
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
The Coase Theorem - correct answer✔✔if private parties can costlessly bargain over the
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
allocation of resources, they can solve the externalities problem on their own
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Why private transactions do not always work (3) - correct answer✔✔Transaction Costs
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Stubbornness
Coordination Problems ||//\\||
Transactions costs - correct answer✔✔costs incurred in the provess of agreeing to and ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
following through on a bargain ||//\\|| ||//\\|| ||//\\|| ||//\\||
Stubbornness - correct answer✔✔even if a beneficial agreement is possible each part may ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
hold out for a better deal
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
verified detailed solutions ||//\\|| ||//\\||
Market Failure - correct answer✔✔When the market fails to allocate society's resources
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
efficiently
Externality Consumption - correct answer✔✔self-interested buyers and sellers neglect the
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
external costs of their actions ||//\\|| ||//\\|| ||//\\|| ||//\\||
Externalities - correct answer✔✔the effect of a market exchange on a third party who is ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
outside to the exchange
||//\\|| ||//\\|| ||//\\||
Negative Externalities effect on Market Quantity - correct answer✔✔if negative, the market
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
quantity is larger than socially desireable
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Positive Externality effect on Market Quantity - correct answer✔✔if positive, the market
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
quantity is smaller tan socially desireable
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
How to find social cost = - correct answer✔✔Private MC + Marginal External Cost
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Internalizing the Externality - correct answer✔✔altering incentives so people consider the ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
external effects of their actions ||//\\|| ||//\\|| ||//\\|| ||//\\||
Private Benefit/WTP - correct answer✔✔What a good is worth to the buyer
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
External benefit - correct answer✔✔the value of the positive impact on bystanders;
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
difference between new demand curve and old demand curve ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
, How to find social value - correct answer✔✔Private Value + external benefit
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Public Policies (4) - correct answer✔✔Command-and-Control
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Market-Based
Corrective taxes/subsidies ||//\\||
Tradeble Pollution Permits ||//\\|| ||//\\||
Command-and-control policies - correct answer✔✔regulate behavior directly ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
market-based policies - correct answer✔✔provide incentives to private decision-makers to ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
change behavior ||//\\||
Tradable Pollution permits - correct answer✔✔issued with a face "pollution value"
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
The Coase Theorem - correct answer✔✔if private parties can costlessly bargain over the
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
allocation of resources, they can solve the externalities problem on their own
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Why private transactions do not always work (3) - correct answer✔✔Transaction Costs
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
Stubbornness
Coordination Problems ||//\\||
Transactions costs - correct answer✔✔costs incurred in the provess of agreeing to and ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
following through on a bargain ||//\\|| ||//\\|| ||//\\|| ||//\\||
Stubbornness - correct answer✔✔even if a beneficial agreement is possible each part may ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
hold out for a better deal
||//\\|| ||//\\|| ||//\\|| ||//\\|| ||//\\||
