Flashcards on Externalities and Public Policy
Externalities and Public Policy: Market Failure & Solutions
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Externalities: Policy and Regulation
22 cards
Card 1
Question: What are tradable pollution permits?
Answer: They allow the voluntary transfer of the right to pollute from one firm to another, creating a market for permits.
Card 2
Question: Why might a firm sell its pollution permit to another firm?
Answer: A firm that can reduce pollution at low cost may prefer to sell its permit to a firm that faces high costs of reducing pollution.
Card 3
Question: What objection do some people have to allowing companies to purchase the right to pollute?
Answer: Some dislike the idea of companies buying the right to pollute (they find it morally wrong to permit pollution through purchase).
Card 4
Question: How does the presentation respond to the objection about buying the right to pollute?
Answer: It argues these critics often overlook that eliminating all pollution has high opportunity costs and the economy has limited ability to eliminate poll
Card 5
Question: What trade-off does the presentation say people must consider regarding pollution?
Answer: People face trade-offs and must decide how much they are willing to give up to achieve zero pollution.
Card 6
Question: According to the summary, what does the Coase theorem state about bargaining and resource allocation?
Answer: If people can bargain without cost, they can reach an agreement that allocates resources efficiently.
Card 7
Question: When should the government step in to address externalities, according to the presentation?
Answer: When private parties cannot adequately deal with externalities, the government should step in.
Card 8
Question: What are two ways the government can address externalities?
Answer: By regulating behaviour or internalising the externality using Pigovian taxes or issuing permits.
Card 9
Question: How can property rights help resolve externalities?
Answer: Creating property rights can enable private parties to bargain and potentially reach a satisfactory outcome.
Card 10
Question: Give three examples of negative externalities listed in the content.
Answer: Car exhaust fumes, cigarette smoking, and barking dogs (loud pets).