Econ 110 Zirlott Final Exam Questions With Correct Answers.

Econ 110 Zirlott Final Exam Questions With
Correct Answers

externality |- |CORRECT |ANSWER✔✔-the |uncompensated |impact |of |one |person's |actions |on |the
|well-being |of |a |bystander |(fancy |term |for |side |effect)




what |type |of |externalities |are |these?

-being |vaccinated |against |contagious |diseases |protects |not |only |you, |but |people |who |sit |next |
to |you |in |class |

-vaccinating |your |pets

-R&D |creates |knowledge |others |can |use

-people |going |to |college |raise |the |population's |education |level, |which |reduces |crime |and |
improves |government |- |CORRECT |ANSWER✔✔-Positive



what |type |of |externalities |are |these?

-air |pollution |from |a |factory |-> |Most |Common

-the |neighbor's |barking |dog

-late-night |stereo |blasting |from |the |dorm |room |next |to |yours

-noise |pollution |from |construction |projects

-health |risk |to |others |from |second-hand |smoke

-texting |on |cell |phones |while |driving |makes |the |roads |less |safe |for |others |- |CORRECT |
ANSWER✔✔-Negative



private |costs |- |CORRECT |ANSWER✔✔-supply |curve, |cost |directly |incurred |by |sellers

,private |value |- |CORRECT |ANSWER✔✔-demand |curve, |the |value |to |buyers |(the |prices |they |are |
willing |to |pay)



social |cost |- |CORRECT |ANSWER✔✔-private |+ |external |cost



external |cost |- |CORRECT |ANSWER✔✔-value |of |the |negative |impact |on |bystanders



in |the |presence |of |a |positive |externality, |the |social |value |of |a |good |includes.. |- |CORRECT |
ANSWER✔✔-private |value |and |external |benefit



external |benefit |- |CORRECT |ANSWER✔✔-the |value |of |the |positive |impact |on |bystanders



internalizing |the |externality |- |CORRECT |ANSWER✔✔-altering |incentives |so |that |people |take |
account |of |the |external |effects |of |their |actions



command |and |control |policies |- |CORRECT |ANSWER✔✔--regulate |behavior |directly

-Examples: |limits |on |quantity |of |pollution |emitted; |requirements |that |firms |adopt |a |particular |
technology |to |reduce |emissions



market |based |policies |- |CORRECT |ANSWER✔✔--provide |incentives |so |that |private |decision-
makers |will |choose |to |solve |the |problem |of |their |own. |

-Examples:corrective |taxes |and |subsidies; |tradable |pollution |permits



corrective |tax |- |CORRECT |ANSWER✔✔-a |tax |designed |to |induce |private |decision-makers |to |
take |account |of |the |social |costs |that |arise |from |a |negative |externality |(also |called |a |Pigouvian |
tax |after |Arthur |Pigou)



tradable |pollution |permits |system |- |CORRECT |ANSWER✔✔-reduces |pollution |at |lower |cost |
than |regulation

, private |solutions |to |externalities |(4) |- |CORRECT |ANSWER✔✔--moral |codes |and |social |
sanctions, |e.g. |the |"Golden |Rule"

-charities, |e.g. |the |Sierra |Club

-contracts |between |market |participants |and |the |affected |bystanders

-the |coase |thereom



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 |do |private |solutions |not |always |work? |(3) |- |CORRECT |ANSWER✔✔-transaction |costs, |
stubbornness, |and |coordination |problems



excludable |- |CORRECT |ANSWER✔✔-a |person |CAN |be |prevented |from |using |it



starbucks, |wireless |internet |acces, |your |U |of |A |education |- |CORRECT |ANSWER✔✔-excludable



not |excludable |- |CORRECT |ANSWER✔✔-a |person |CANNOT |be |prevented |from |using |it



FM |radio |signals, |national |defense |- |CORRECT |ANSWER✔✔-not |excludable



rival |- |CORRECT |ANSWER✔✔-if |one |person's |use |diminishes |others' |use



starbucks, |tacos, |apple |iPad |- |CORRECT |ANSWER✔✔-rival



not |rival |- |CORRECT |ANSWER✔✔-one |person's |use |has |no |effect |on |others' |use