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Environmental policies: Explain the overfishing problem in Singapore
i. What are the private costs of catching fish-faced by anyone fisherman?
ii. What is the external cost (negative externality) of catching fish generated by anyone fisherman?
iii. Why is the current level of fish production too high (above the socially efficient level)?
iv. What implications does this have for the future production of fish (if there is no government intervention)?

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Mahe Alam
Mahe AlamLv10
28 Sep 2019

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home / study / business / economics / questions and answers / Question 1 Which Of The Following Is The Best Example ... Question: Question 1 Which of the following is the best exam... Bookmark Question 1 Which of the following is the best example of a positive externality? A car company lays off 10,000 employees in order to cut costs. An individual drives a large SUV, which increases the amount of greenhouse gases in the atmosphere. An individual smokes in a restaurant, which bothers other patrons. A child is vaccinated against a disease, which reduces the probability that other children will catch the disease. 4 points Question 2 As a result of a negative externality, the market equilibrium quantity is too ______ compared to the socially optimal quantity. As a result of a positive externality, the market equilibrium quantity is too ______ compared to the socially optimal quantity. high; high. low; low. high; low. low; high. 4 points Question 3 Based on the diagram below, the deadweight loss area associated with the market equilibrium equals: Week06_graph1.jpg $10 $50 $80 $1,000 4 points Question 4 A firm's accounting profit is given by total revenue: less implicit costs. less explicit costs. less economic profit. less implicit and explicit costs. 4 points Question 5 Suppose an activity has a private cost equal to $30 and a private benefit equal to $30. The associated social cost equals $35 and the social benefit equals $30. Which of the following statements is true about this activity? There is a negative externality associated with this activity but not a positive externality. There is a positive externality associated with this activity but not a negative externality. 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There is neither a positive nor a negative externality associated with this activity. 4 points Question 6 The Coase Theorem implies that: the efficient level of an externality is generally zero. private individuals living in market economies should not be concerned with externalities. government intervention is not always needed to arrive at the efficient level of an externality. government laws are unnecessary. 4 points Question 7 An industry in which a small number of large firms sell products that are either close or perfect substitutes is: perfectly competitive. monopolistically competitive. an oligopoly. a monopoly. 4 points Question 8 When a negative externality is present in a market: a tax can increase the level of economic surplus. the social benefits are greater than the private benefits. there is generally too little of the good produced by private markets. the government should ensure that there are zero external costs associated in all markets. 4 points Question 9 In the presence of a positive externality, the government can arrive at the socially optimal output level by: paying producers a subsidy equal to the amount of social benefits associated with the activity. charging producers a tax equal to the amount of social costs associated with the activity. paying producers a subsidy equal to the amount of external benefits associated with the activity. charging producers a tax equal to the amount of external costs associated with the activity. 4 points Question 10 The tragedy of the commons is that: too few individuals have access to high quality healthcare. common people overconsume public goods. the quality of life for lower income people is generally lower than that of higher income people. a resource with no price tends to be exploited until its marginal benefit falls to zero. 4 points Question 11 One potential remedy to the tragedy of the commons is to: never allow a single individual to consume more than one percent of the common resource. criminalize the usage of common resources. allow individuals to use a common resource as long as they receive some benefit from doing so. place a common resource under private ownership. 4 points Question 12 As a result of a positional externality: contestants have a tendency to invest in a series of mutually offsetting investments in performance enhancement. there is generally an underinvestment in performance enhancement. the market price of performance enhancement materials is too high. the quality of performance in competitive situations is lower than the socially optimal level. 4 points Question 13 Which of the following statements is true regarding health insurance? 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Question 1:

The annual income that can be consumed without diminishing the total capital assets of a nation is

purchasing power parity income.
sustainable national income.
environmental capital stock.
per capita income.

Question 2:

Maintaining the rainforest is very important because

of its absorptive capacity for CO2 emissions.
of maintaining agricultural production of countries dependent on the rainforest such as Brazil.
ensuring a successful land reform policy.
encouraging rainforest settlement of the poor

Question 3:

Which of the following leads to an underallocation of resources to a specific economic activity?

External benefits
Marginal costs
External costs
Marginal benefits

Question 4:

The free-rider problem plagues public goods because

once public goods are produced it is not possible to exclude anyone from consuming these goods.
the public doesn't care about public goods.
public goods are not produced by profit-maximizing firms and hence can be produced only at a loss to society.
policymakers ignore opportunity costs in making decisions

Question 5:

Which of the following methods could be used to correct for external costs?

Require firms in the industry to install pollution control devices.
Impose a tax or an effluent fee on the offenders.
Have the offender clean up the pollution it caused.
All of the above would be appropriate.

Question 6:

To correct for a negative externality, a government might impose a uniform tax related only to the physical quantity of pollution if

the economic damages are zero.
the administrative costs are high.
the cost of ascertaining the actual economic costs are relatively small.
the economic damages associated with the pollution are different across different locations.

Question 7:

In order to internalize the externality due to pollution, the government should impose a tax based on

the size of the firm causing the pollution.
the physical amount of pollution.
the value of the pollution-causing business activity.
the economic damage associated with the pollution.

Question 8:

In a market for emission permits, firms that emit over their allowed limits

pay a price of these emissions.
are forced to shut down.
are taxed by the government for the amount of emissions.
receive a subsidy for the amount of emissions.

Question 9:

The 1997 Kyoto Protocol was signed by

more than three dozen nations.
all nations in the world.
only the United States and the European Union.
only nations in Asia.

Question 10:

The problem of overfishing in waters that are commonly owned can be solved by

subsidizing fishing.
establishing property rights for fishing in the waters.
the use of the Coase Theorem.
allowing the market to ration fish.

2.) Consider a beekeeper that is deciding how much honey to produce. The beekeeper gains a benefit from producing honey, represented by the marginal benefit function and which is given by:

MB= 300 - 6Q

where Q is barrels of honey.

In addition, she has a marginal cost function, which reflects her cost of producing honey; this is given by:

MC= 40 + 4Q

The beekeeper’s total profit function is given by:

Profit= 360Q + Q^2

The more honey the beekeeper produces, the more bees there are to pollinate a neighboring apple orchard. Thus, in addition to the private benefit accruing to the beekeeper herself, there is also a marginal external benefit to the apple orchard, which is given by:

MEB= 100 - 2Q

And a total external benefit to the apple orchard given by:

TEB= 100Q - Q^2

a. Find an expression for the social marginal benefit (SMB) in this case, defined as you think appropriate. Calculate the level of honey production that will arise if the beekeeper acts in her self-interest only. Calculate the socially efficient level of honey production as well.

b. Suppose that the beekeeper and the owner of the apple orchard enter into negotiations. The orchard owner wants to offer a payment to the beekeeper to change honey production from her self-interested production level to the socially efficient level (all at once). What is the maximum total payment that the orchard owner would be willing to pay for this overall change? What is the minimum total payment that the beekeeper would require before making this overall change?

c. Assume that, if a deal is reached, each party must pay $35 in legal fees to finalize it. If there are no additional transaction costs, will the socially efficient quantity be reached? Explain.

d. Irrespective of your answer to part c, assume that the beekeeper and the orchard owner come to a private agreement to set honey production at the socially efficient quantity. However, now suppose that a policymaker reads somewhere that honey production provides a positive externality to apple orchards, and therefore decides that the beekeeper should be provided with a production subsidy for each unit of honey that the beekeeper is willing to produce. With this subsidy in place, the beekeeper decides to increase production by an additional 5 barrels. Calculate the associated efficiency loss.

e. If honey is good to eat and bees are good for trees, why is there such a thing as too much honey?

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