Study questions for first exam:
Questions in Rosen and Gayer, 8th Edition:
Page 14: 1, 3, & 6.
Page 67: 1, 2, 7, &10.
Page 103: 1, 2, 3, 6, & 7.
Page 132: 2, 3, 10, & 11.
Questions in Rosen, 7th (OLD) Edition:
Page 17: question 1 and 3.
Page 77: questions 1, 3, 4, and 6.
Page 107: questions 1, 2, 3, 5, 6, and 8.
Page 141: questions 1, 2, 4, and 6.
1. Under what conditions are externalities likely to be internalized without the necessity of government intervention?
2. Why do fixed limits on pollution emissions fail to internalize the externality that generates the pollution?
3. Would the sales of pollution rights or certificates be an efficient means of allocating a given amount of pollution? Explain.
4. What are the essential differences between pure public goods and pure private goods?
5. Compare the conditions necessary for efficiency for a pure public good with a private good.
6. Explain free rider behavior in the following contexts:
a. Service as a leader in a club or other organization.
b. Contribution to the support of public broadcasting.
c. The decision to receive an inoculation for a contagious disease.
7. How does a person decide to vote on any issue that proposes to change the amount of public goods supplied by government?
8. Why does not a political equilibrium lead to efficiency in the way that equilibrium in private goods markets does?
9. Why is a voter in the "middle of the pack" likely to be satisfied with the outcome of political decisions?
10. The supply of paper is given by the following equation: Qs = 5,000P and the demand for paper is given by: Qd = 400,000 - 1,000P. The Q's are in tons. There is pollution associated with the production of paper causing marginal external damages of $20 per ton.
a. Find the competitive price and quantity of paper
b. Determine the efficient level of paper production.
c. Devise a corrective (Pigouvian) tax to that would achieve efficiency under competition.