Price, Cost 9987654321 10 Private Cost Social Cost Demand 12 3 4 5 6 7 8 9 10 Quantity (a) Give a definition of a negative externality and explain how it arises in a market. (b) Refer to the graph above. If the government does not intervene in this market, what is the free market equilibrium? Is it socially efficient? Explain (c) What kind of government intervention is required in this case? Explain how it will change the market outcome

Price, Cost 9987654321 10 Private Cost Social Cost Demand 12 3 4 5 6 7 8 9 10 Quantity (a) Give a definition of a negative externality and explain how it arises in a market. (b) Refer to the graph above. If the government does not intervene in this market, what is the free market equilibrium? Is it socially efficient? Explain (c) What kind of government intervention is required in this case? Explain how it will change the market outcome

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter13: Positive Externalities And Public Goods

Section: Chapter Questions

Problem 6SCQ: Education provides both private benefits to those who receive it and broader social benefits for the...

See similar textbooks

Similar questions

What is the difference between private costs and social costs?
A city currently emits 15 million gallons (MG) of raw sewage into a lake that is beside the city. Table 12.13 shows the total costs (TC) in thousands of dollars of cleaning up the sewage to different levels, together with the total benefits (TB) of doing so. Benefits include environmental, recreational, health, and industrial benefits. Using the information in Table 12.13 calculate the marginal costs and marginal benefits of reducing sewage emissions for this City. What is the optimal level of sewage for this city? How can you tell?
What is a marketable permit and what incentive does it provide for a firm to account for external costs?
Refer to Table 12.2. The externality created by the refrigerator production was 100. However, once we accounted for both the private and additional external costs, the market price increased by only 50. If the external costs were 100 why did the price only increase by 50 when we accounted for all costs?
How can high-income countries benefit from covering much of the cost of reducing pollution created by low-income countries?
An emissions tax on a quantity of emissions from a film is not a command-and-control approach to reducing pollution. Why?
Name two public goods and explain why they are public goods.
What is a pollution charge and what incentive does it provide for a firm to take external costs into account?
Education provides both private benefits to those who receive it and broader social benefits for the economy as a whole. Think about the types of policies a government can follow to address the issue of positive spillovers in technology and then suggest a parallel set of policies that governments could follow for addressing positive externalities in education.
Identify the following situations as an example of a negative or a positive externality: You are a birder (bird watcher), and your neighbor has put up several birdhouses in the yard as well as planting trees and flowers that attract birds. Your neighbor paints his house a hideous color. Investments in private education raise your countrys standard of living. Trash dumped upstream flows downstream right past your home. Your roommate is a smoker, but you are a nonsmoker.
What are better-defined property rights and what incentive do they provide to account for external costs?
What are the two key characteristics of public goods?