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12 • Review Questions 303

Review Questions

14. What is an externality?

15. Give an example of a positive externality and an example of a negative externality.

16. What is the difference between private costs and social costs?

17. In a market without environmental regulations, will the supply curve for a firm account for private costs,

external costs, both, or neither? Explain.

18. What is command-and-control environmental regulation?

19. What are the three problems that economists have noted with regard to command-and-control

regulation?

20. What is a pollution charge and what incentive does it provide for a firm to take external costs into

account?

21. What is a marketable permit and what incentive does it provide for a firm to account for external costs?

22. What are better-defined property rights and what incentive do they provide to account for external costs?
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