ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- The Cemex plant in Davenport produced cement. The production of cement created dust which traveled through the air and landed on the nearby area. Testing at an elementary school and fire department near the plant showed toxic levels of Chromium 6 resulting from the dust. Using the concept of externalities and the graph below, explain what kind of externality this event created and the effects this had on economic efficiency. Be sure to indicate any differences between market price and quantity for cement and the efficient price and quantity.arrow_forwardDistinguish carefully between a positive externality and a negative externality. Explain your answer with an example of each. (needs to be at least 100 words )arrow_forwardCan you answer this?arrow_forward
- Define what is externality in detail.arrow_forwardQuestion 3 Professor Paudel shows the graph for the case of negative externalities in the class. He wants the class to think about positive externalities as well. This got him thinking a lot about potential market failure due to positive production externality in the oil exploration market. Specifically, in his research, he found that expenditures on oil exploration by any company can have a positive externality because they offer more profitable opportunities for other companies. Professor Paudel wants you to enlighten him on the following issues: a) Graphically show private and social marginal cost functions and the demand curve. b) Under positive externalities as mentioned above, is the social marginal cost below than the private marginal cost? Explain and support your answers with the help of a clearly labeled graph. c) Under positive externalities as mentioned above, what's the relationship between social optimum quantity and the competitive market equilibrium quantity? Is there…arrow_forwardWhat is an externality? Provide an example.arrow_forward
- Use a supply and demand graph to show a good which should be illegal owing to it's negative externality.arrow_forwardConsider the above graph. Is there an externality present in this market? If so, what kind? No, there is no externality. Yes, a negative externality. Yes, a positive externality.arrow_forwardWhat are commons and public goods? Provide any two examples of such goods.arrow_forward
- If the government subsidizes vaccination against influenza to internalize the externality, should it impose the subsidy on consumers or producers of flu vaccines? How large should the subsidy be? How much less per flu vaccine would patients (i.e., consumers) pay? How much more would manufacturers (i.e., producers) of flu vaccines receive?arrow_forwardFill in the blanks: There is ____________ in an economy with positive externality. This problem can be dealt with by providing a _______ to the individual(s) creating the positive externality.arrow_forwardI chose option D and got this wrong. I thought that when you had a positive externality The demand curve move to the right. Wouldn’t this mean that the level of output and the price would be greater than the free market ones? can you explain how my answer is wrong? What is correct?arrow_forward
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