Chapter 9 Market Failure: Imperfect Information, External Benefits, and External Costs

| November 9, 2018

45)
A pollution tax internalizes the costs of pollution a firm is imposing on others.

46)
A pollution tax allows a firm to externalize some of its internal costs.

47)
As the volume of waste decreases (holding the amount of paper produced
constant), the production cost per ton of paper increases at a decreasing rate
because the firm must use increasingly sophisticated abatement equipment to
decrease the volume of waste.

48)
Under a system of pollution taxes we expect firms to cut pollution until the
marginal benefit from tax savings equals the marginal increase in production
costs due to decreasing pollution.

49)
In a competitive market, a pollution tax increases the equilibrium price of the
polluting good, decreases the equilibrium quantity, and decreases the volume of
waste.

50)
A carbon tax will raise the price of an energy-intensive good such as steel.

51)
A carbon tax would increase the total volume of greenhouse gases.

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