4. Externalities - Definition and examplesAn externality arises when a firm or person engages in an activity that affects the well-being of a third party, yet neither pays nor receives anycompensation for that effect. If the impact on the third party is detrimental, it is called aexternality.The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph reflect themarket equilibrium price and quantity for this good.Shift one of the curves to reflect the presence of the externality. If there are external costs of production, then you should shift the supply curve toreflect the social costs of producing the good; similarly, if there are external benefits from production, then you should shift the demand curve toreflect the social benefits from consuming the good.PRICE (Dollars per unit)QUANTITY (Units)SupplyDemandDemandSupplyWith this type of externality, in the absence of government intervention, the market equilibrium quantity produced will beefficient quantity.Which of the following generate the type of externality previously described? Check all that apply.than theThe local airport has doubled the number of runways, causing additional noise pollution for the surrounding residents.Nick has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season.A leading software company has decided to increase its research budget for inventing new open-source technologies.Your roommate, Crystal, has bought a cat to which you are allergic.

1. Fill in the blank: If the impact on the third party is detrimental, it is called a "negative"…

With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will be efficient quantity. Which of the following generate the type of externality previously described? Check all that apply. than the The local airport has doubled the number of runways, causing additional noise pollution for the surrounding residents. Nick has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season. A leading software company has decided to increase its research budget for inventing new open-source technologies. Your roommate, Crystal, has bought a cat to which you are allergic.

With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will be efficient quantity. Which of the following generate the type of externality previously described? Check all that apply. than the The local airport has doubled the number of runways, causing additional noise pollution for the surrounding residents. Nick has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season. A leading software company has decided to increase its research budget for inventing new open-source technologies. Your roommate, Crystal, has bought a cat to which you are allergic.

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 6PA

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2. Use the graph below to answer the two questions on the right. Price If a positive externality exists and the government intervenes, which curve shifts and in what direction? Ssocial internal If a negative externality exists and the government does intervene, which curve shifts Docial and in what direction? Dinternal Quantity
3. Use the graph to answer the question that follows.Assume that the market shown is perfectly competitive with no externalities. If the production output is 15,000 units, then A-the market is allocatively efficient B-there is a shortage of the good C-deadweight loss is being minimized D-deadweight loss is being maximized E- consumer and producer surplus are maximized 5.Use the graph to answer the question that follows. What is the market equilibrium quantity and price at which there is no government regulation? A-15, $17.50 B-20, $15 C-30, $25 D-35, $22.50 E- Indeterminate
11. Compared to a good with no externalities, a good with a negative externality will appear to have experienced a OIncrease in Supply ODecrease in Supply Olncrease in Demand ODecrease in Demand at each corresponding price...
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Externalities - Definition and examples An externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives any compensation for that effect. If the impact on the third party is adverse, it is called a ___________ externality. The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good.
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