B. determine the demand for pollution rights.

C. set the price of pollution.

D. reduce the incentive for technological innovations to further reduce pollution.

B. no pollution of the environment is tolerated

C. the regulators decide how much each polluter should reduce its pollution.

D. each polluter reduces its pollution an equal amount

A. the party affected by the externality has the initial property right to be left alone.

C. the government requires them to negotiate with each other

D. There are a large number of affected parties.

E. each affected party has equal power in the negotiations.

A. tax the good

C. have the government produce the good until the value of an additional unit is zero

D. ban the good creating the externality

A. costs incurred due to a large number of parties affected by the externality

B. costs incurred to enforce the agreement

C. All of these answers are considered transaction costs

D. costs incurred due to lawyers fees

A. none of these answers

B. a social cost curve that is below the supply curve (private cost curve) for a good

D. a social value curve that is above the demand curve (private value curve) for a good

A. Roberto will pay Thomas 100 and Roberto will stop playing loud music

B. Roberto will pay Thomas 150 and Roberto will continue to play loud music

D. Thomas will pay Roberto between 100 and 150 and Roberto will continue to play loud music

A. have the government take over the production of the good causing the externality

B. subsidize the good

C. ban the production of all goods creating negative externalities

B. They would all rank equally high because the same result can be obtained from any one of the policies

C. Pigouvian taxes, command-and-control policies, tradable pollution permits.

D. tradable pollution permits command-and-control policies, Pigovian taxes.

E. command-and-control policies, tradable pollution permits, Pigovian taxes.

A. an attempt to internalize a negative externality

B. a command-and-control policy

D. a Pigouvian tax

A. equilibrium quantity to exceed the optimal quantity

B. equilibrium quantity to be either above or below the optimal quantity

D. equilibrium quantity to equal the optimal quantity

A. none of these answers

B. a social value curve that is below the demand curve (private value curve) for a good

C. a social cost curve that is above the supply curve (private cost curve) for a good

A. All of these answers are true

B. Pigovian taxes are more likely to reduce pollution to a targeted amount than tradable pollution permits.

D. To set the quantity of pollution with tradable pollution permits, the regulator must know everything about the demand for pollution rights.

E. Tradable pollution permits efficiently reduce pollution only if they are initially distributed to the firms that can regulator pollution at the lowest cost.

B. equilibrium quantity to be either above or below the optimal quantity

C. optimal quantity to exceed the equilibrium quantity.

D. equilibrium quantity to equal the optimal quantity

A. determines the demand for pollution rights.

C. reduces the incentive for technological innovations to further reduce pollution

D. Sets the quantity of pollution

A. a tradeable pollution permits.

C. an application of the Coase theorem

D. an attempt to internalize a positive externality

B. by allocating tradable technology permits to high technology industry.

C. to internalize the negative externality associated with industrial pollution

D. to help stimulate private solution to the technology externality

A. a technology spillover

B. a positive externality

D. an efficient market outcome.

A. It is efficient for Roberto to stop playing loud music only if Thomas has the property right to peace and quiet

B. It is efficient for Roberto to stop playing loud music only if Roberto has the property right to play loud music

D. it is efficient for Roberto to continue to play loud music

A. the cost that accrues to the seller in a market

C. the compensation paid to a firms external consultants.

D. none of these answers

E. the benefit that accrues to the buyer in a market