Some countries, such as Germany, have a mixture of highways with no speed limits and other roads with strict limits on vehicle velocity. How might these apparently contradictory rules relate to the externalities of high-speed driving

With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will be    than the socially optimal quantity.   Which of the following generate the type of externality previously described? Check all that apply. Your roommate Crystal has bought a puppy that barks all day while you are trying to study economics.   Tim has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season.   A microbiology lab has published its breakthrough in swine flu research.   The local airport has doubled the number of runways, causing additional noise pollution for the surrounding residents.

Smokers impose negative externalities on nonsmokers. Suppose the airspace in a restaurant is a resource owned by the restaurant owner. How would the owner respond to the negative externality caused by smokers?  Suppose smokers own the airspace. How would that change matters?  If the government gives ownership of the air to nonsmokers, would that change matters? Explain your answer.  What does a ban on smoking in the restaurant do?

Consider the market for bolts. Suppose that a hardware factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additional ton of bolts imposes a constant external cost of $90 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for bolts. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $90 per ton. PRICE (Dollars per ton of bolts 600 540 480 420 360 300 240 180 120 60 0 0 C ☐ 1 O ☐ 2 O 0 3 4 QUANTITY (Tons of bolts) 0 The market equilibrium quantity is O ☐ 5 Supply (Private Cost) Demand (Private Value) 6 7 Social Cost (?) ▼ tons of bolts, but the socially optimal quantity of bolt production is To create an incentive for the firm to produce the socially optimal quantity of bolts, the government could impose a $ per ton of bolts. tons. of

Two MSU fraternities, Phi Kappa Sigma and Phi Kappa Tau, are accustomed to each having 6 parties a month. Phi Kappa Sigma and Phi Kappa Tau are located close to each other on Bogue Street. These parties impose a negative externality on their other neighbors on Bogue Street. Suppose President Stanley decides that the socially optimal total number of parties on Bogue Street is 8 parties a month. The total benefits each fraternity derives from having a certain number of parties a month are given in the table below. Number of Parties 0 1 2 3 4 5 6 Phi Kappa Sigma's Total Benefits 0 300 500 650 700 740 775 Phi Kappa Sigma's Marg. Benefits Phi Kappa Tau's Total Benefits 0 250 475 650 750 825 850 Phi Kappa Tau's Marg. Benefits a) Suppose President Stanley decides to limit the total number of parties to 8 by issuing Phi Kappa Sigma 6 rights and Phi Kappa Tau 2 rights. Each right allows the fraternity to have one party. If these rights are allowed to be traded, how many rights will be sold? Who…

What conditions are needed for the Coase Theorem to be a viable way to correct externalities?