Give an example of a negative externality and an example of a positive externality.
In what way does the patent system help society solve an externality problem?
3. What are corrective taxes? Why do economists prefer them to regulations as a way to protect the environment from pollution?
4. List some of the ways that the problems caused by externalities can be solved without government intervention.
5. imagine that you are a nonsmoker sharing a room with a smoker. According to the Coase theorem, what determines whether your roommate smokes in the room? Is this outcome efficient? How do you and your roommate reach this solution?
1. Explain what is meant by a good being “excludable.” Explain what is meant by a good being “rival in consumption.” Is a slice of pizza excludable? Is it rival in consumption?
2. Define and give an example of a public good. Can the private market provide this good on its own? Explain.
3. What is cost–benefit analysis of public goods? Why is it important? Why is it hard?
4. Define and give an example of a common resource. Without government intervention, will people use this good too much or too little? Why?
1. Over the past century, has the governments tax revenue grown more or less slowly than the rest of the economy?
2. Explain how corporate profits are taxed twice.
3. What is the marginal tax rate on a lump-sum tax? How is this related to the efficiency of the tax?
4. Give two arguments why wealthy taxpayers should pay more taxes than poor taxpayers.
5. What is the concept of horizontal equity and why is it hard to apply?