Problem 1 The following problems require the use of the blank graph below. Make sure that you are clear in doing any drawing, marking and labeling of the graph. 550 $ 500 450 400 350 300 250 200 150 100 50 25 75 100 125 150 Marijuana (lbs) 175 200 225 Part A Draw and label all the curves needed to show a negative externality. Please use a straight-edge. 250 275 Part B Indicate on the graph (by drawing lines) the price and output values that occur at the market equilibrium. Label the price value on the vertical axis with "PME" and label the quantity value on the horizontal axis with "QME". Part C Shade in and label the appropriate part of your graph that represents the total external costs that occurs at the social equilibrium. Use the label "TEC". To do this, you will also have to identify and label the social equilibrium quantity on the horizontal axis. Use the label "QSE".

Problem 1 The following problems require the use of the blank graph below. Make sure that you are clear in doing any drawing, marking and labeling of the graph. 550 $ 500 450 400 350 300 250 200 150 100 50 25 75 100 125 150 Marijuana (lbs) 175 200 225 Part A Draw and label all the curves needed to show a negative externality. Please use a straight-edge. 250 275 Part B Indicate on the graph (by drawing lines) the price and output values that occur at the market equilibrium. Label the price value on the vertical axis with "PME" and label the quantity value on the horizontal axis with "QME". Part C Shade in and label the appropriate part of your graph that represents the total external costs that occurs at the social equilibrium. Use the label "TEC". To do this, you will also have to identify and label the social equilibrium quantity on the horizontal axis. Use the label "QSE".

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 42P: Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the...

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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?
What is an externality?
What is the difference between private costs and social costs?
As the extent of environmental protection expands, would you expect the marginal benefits of environmental protection to rise or fall? Why or why not?
What is a pollution charge and what incentive does it provide for a firm to take external costs into account?
Suppose a city releases 16 million gallons of raw sewage into a nearby lake. Table 12.8 shows the total costs of cleaning up the sewage to different levels, together with the total benefits of doing so. (Benefits include environmental, recreational, health, and industrial benefits.) Using the information in Table 12.8, calculate the marginal costs and marginal benefits of reducing sewage emissions for this city. See Production, Costs and Industry Structure if you need a refresher on how to calculate marginal costs. What is the optimal level of sewage for this city? Why not just pass a law that films can emit zero sewage? After all, the total benefits of zero emissions exceed the total costs.
Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost?
As the extent of environmental protection expands, would you expect marginal costs of environmental protection to rise or fall? Why or why not?
What is a marketable permit and what incentive does it provide for a firm to account for external costs?
A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwoods forest and grow com, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between T and R, decide which one is better. Why? In the choice between T and S, can you say which one is better, and why? If you had to guess, which choice would you think is more likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?
Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?