A study finds that the noise from lawn mowers is harmful; hence, the government imposes a $20 tax on the sale of every lawn mower. This amount accurately accounts for the external cost of the noise pollution. Before the corrective tax, basic push mowers regularly sold for $190. After the tax is in place, the market price for basic push mowers rises to $195. The socially optimal price of basic push mowers is _____ $ .

A study finds that the noise from lawn mowers is harmful; hence, the government imposes a $20 tax on the sale of every lawn mower. This amount accurately accounts for the external cost of the noise pollution. Before the corrective tax, basic push mowers regularly sold for $190. After the tax is in place, the market price for basic push mowers rises to $195. The socially optimal price of basic push mowers is _____ $ .

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter30: Market Failure: Externalities, Public Goods, And Asymmetric Information

Section: Chapter Questions

Problem 2WNG

See similar textbooks

Similar questions

A study finds that the noise from lawn mowers is harmful; hence, the government imposes a $25 tax on the sale of every lawn mower. This amount accurately accounts for the external cost of the noise pollution. Before the corrective tax, basic push mowers regularly sold for $190. After the tax is in place, the market price for basic push mowers rises to $208. Because of the tax, the number of basic push mowers sold will .The socially optimal price of basic push mowers is $ .The private market price is $ .A firm selling basic push mowers receives $ after it pays the tax.
Save The market price of insecticide is initially $10 per unit. To address a negative externality in this market, the government decides to charge producers of insecticide for the privilege of polluting during the production K process. A fee that fully takes into account the social costs of pollution is determined, and once it is put into effect, the market supply curve for insecticide shifts upward by $8 per unit. The market price of insecticide also increases, to $12 per unit. What fee is the government charging insecticide manufacturers? $ (Enter a numeric response using an integer.)
A firm has 20 employees, each of whom desires a more pleasant work environment. Accordingly, they are considering planting shrubs near the firm’s parking lot. Each employee has an inverse demand for shrubs of P = 10 − Q, where Q is the number of shrubs. The marginal cost of planting shrubs is $20 each. 1. What is the socially efficient quantity of shrubs to plant? 2. How much would each person have to pay per shrub to achieve the efficient quantity? 3. How many shrubs are likely to be planted? Why?
Suppose 15 people each have the demand Q=220 - 40P for streetlights, and 10 people have the demand Q = 180 - 20P for streetlights. The cost of building each streetlight is $8. If it is impossible to purchase a fractional number of streetlights, how many streetlights are socially optimal?
11-) Andrew, Beth, and Cathy live in Lindhville. Andrew’s demand for bike paths, a public good, is given by Q = 12–2P. Beth’s demand is Q = 18–P, and Cathy’s is Q = 8–P/3. The marginal cost of building a bike path is MC = 21. The town government decides to use the following procedure for deciding how many paths to build. It asks each resident how many paths they want, and it builds the largest number asked for by any resident. To pay for these paths, it then taxes Andrew, Beth, and Cathy the prices a, b, and c per path, respectively, where a + b + c = MC. (The residents know these tax rates before stating how many paths they want.)A-). If the taxes are set so that each resident shares the cost evenly (a = b = c), how many paths will get built?B) Show that the government can achieve the social optimum by setting the correct tax prices a, b, and c. What prices should it set?
QUESTION 1 Consider the market for fast food. Suppose the demand for fast food is given by QD=6-P where P is the price of an item (a burger, say) in dollars. Also suppose the supply is given by QS=P. The equilibrium price in this market is The equilibrium quantity of fast food is Fast food produces a lot of waste in all of the packaging that goes along with it when taken to go. This waste produces negative externalities - the private cost of consuming fast food (it's price) is less than the marginal social cost, which includes the cost of having to dispose of the waste. Suppose that the additional cost to society from each item of fast food produced is 0.5 dollars. In this case, the socially efficient quantity of fast food is
Price GF E D 0 A) 0. BA OB) G. OC) D. OD) F. Quantity с S In the graph, line S is the current supply of this product, while line S, is the optimal supply from the society's perspective. If government corrects this externality problem and shifts production to the socially optimal level, then the product price will be equal to D
10-) Suppose 10 people each have the demand Q = 20 – 4P for streetlights and 5 people have the demand Q = 18 – 2P for streetlights. The cost of building each streetlight is 3. If it is possible to purchase a fractional number of streetlights, how many streetlights are socially optimal?
A power plant releases an unpleasant odor into the local environment. This market is perfectly competitive, and the plant does not consider the damages imposed on local citizens in terms of lower air quality. The market can be characterized by the following equations: MPB = 800 - 0.5Q MPC = 80 + 0.3Q MEC = 0.4 Q a) Find the competitive equilibrium price and quantity, Qc and Pc. b) Find the socially optimal (or efficient) price and quantity, Qe and Pe. c) Provide a geographical depiction of the competitive and socially optimal solutions. Make sure you label the graph focusing on the following items: units of each axis, labels of curves (MPC, MPB, MSB, MSC), competitive equilibrium price and quantity, and socially optimal price and quantity. d) Analytically derive the social welfare gains from internalizing the externality AND illustrate this welfare gain on the figure you created in part (c). e) Suppose the plant owns the property rights to local air and it is…
Public Goods. Suppose a neighborhood in Segovia’s central business area is deciding how many fountains they want to see in the main avenue. There is a first group of 20 neighbors and each has a demand Q = 20 − P for fountains. There is a second group of 5 people, and each has a demand Q = 20 − 2P for fountains. The cost of building each fountain is 225. How many fountains are socially optimal? Fountains are public goods. Hint: To obtain the SMB, please first transform the demand functions into “public goods’ valuations” (“isolate P”) and then multiply them by the amount of neighbors per group. Then you can proceed with the vertical summation.
Which of the following policies could help the government achieve the efficient outcome? Check all that apply. Introduce emission taxes Offer a subsidy to consumers equal to the vertical distance between the marginal private benefit curve and the marginal social benefit curve Implement tradable pollution permits Offer a subsidy equal to the price at the efficient outcome Offer a subsidy to producers equal to the vertical distance between the marginal private benefit curve and marginal social benefit curve
Parks confer many external benefits on society: open space, trees that reduce pollution, and so on. Therefore, the market equilibrium quantity of parks is not equal to the socially optimal quantity. The following graph shows the demand for parks (their private value), the supply of parks (the private cost of producing them), and the social value of parks, including both the private value and external benefits. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. (?) Supply (Private Cost) Market Equilibrium Socially Optimal Level Social Value Demand (Private Value) QUANTITY OF PARKS PRICE OF PARKS