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Externalities
Externalities 2.0
Emissions Taxes
Other Externality Policies
Optional
100
The cost borne by the producer of a good or service.
What is private cost?
100
The cost borne by society from the production of a good or service.
What is social cost?
100
This is another term for an emissions tax.
What is a Pigouvian Tax?
100
A law that requires producers or consumers to protect the environment by purchasing or using certain goods or services would be classified as this.
What is an environmental standard?
100
This is a potential solution to a situation where a positive externality exists.
What is a subsidy?
200
When a negative externality exists in a market, the natural market outcome will produce a quantity that is this compared the socially optimal quantity.
What is overproduce the good or service?
200
If at the market quantity, MSC is $30, MPC is $15 and both the MPB and MSB are $15, then the externality in this market is equal to this.
What is $15?
200
An ideal Pigouvian tax should be set equal to this in order to fix a negative externality.
What is the value of the externality?
200
This is the reason that economists often consider policies other than environmental standards when dealing with externalities. (A proper answer should include an explanation)
What are the inefficiencies caused by reduced market flexibility?
200
These are potential solutions for the case where negative externalities exist.
What are taxes, quotas and cap and trade systems?
300
A benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service.
What is an externality?
300
College education, flu shots and renovating a home are all examples of this.
What is a positive externality?
300
Graphically, the ideal Pigouvian tax would be represented by the vertical difference between these two curves.
What are the marginal social cost (benefit) and marginal private cost (benefit) curves?
300
Licenses to emit limited quantities of pollutants that can be bought and sold on an open market are a trademark of this type of systems.
What are tradable emissions permits?
300
This is the value of a market's externality if MPC=MSC and MPB=MSB.
What is $0?
400
This condition defines the optimal level of pollution.
What is marginal social benefit equals marginal social cost?
400
This is the name for the inefficiency caused by an external cost.
What is deadweight loss?
400
This is often cited as the primary issue with implementing an efficient Pigouvian tax.
What is the uncertainty associated with the true external costs of a given situation?
400
Under a tradable permit system, if a firm A has marginal abatement costs of $500 per unit and firm B has marginal abatement costs of $300, then this would likely be the result under this system.
What is Firm A will (attempt) to purchase permits from Firm B?
400
This is the most difficult issue that faces tradable permit systems.
What is how the government sets the quantity of permits?
500
Air pollution, noise pollution and roommates not doing their dishes are all examples of this.
What is a negative externality?
500
Social cost is the sum of these two items.
What are private cost and external cost?
500
When a Pigouvian tax is properly implemented, it forces polluting firms to do this with the externality they create.
What is internalize the externality?
500
The success of the cap and trade system in America is best demonstrated by its use on this pollutant.
What is sulfur dioxide?
500
If the success or failure of a good or service in a market tends to be self-reinforcing, then the market likely exhibits this characteristic.
What is positive feedback?