ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Externalities can arise from both production and consumption. Negative production externalities cause the demand curve to shift leftward while positive consumption externalities result is a rightward shift in the demand curve.
a.
True
b.
False
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- Which of the following situations is an example of a market with a negative externality? A volunteer group purchases and assembles new bird feeders and houses to place along a walking path. O Jody decides to bring her lunch everyday rather than eat in the cafeteria. A factory pollutes the air near a park so it is not usable when the factory is running. Sean washes the dishes by hand rather than using the dishwasher. O Oarrow_forwardWhat is an externality? Provide an example.arrow_forwardWhich of the following is an example of a positive externality? O A college student buys a new car when she graduates. O The mayor of a small town plants flowers in the city park. O Local high school teachers have pizza delivered every Friday for lunch. O An avid fisherman buys new fishing gear for his next fishing triparrow_forward
- a. When a firm imposes an external social cost (negative externality), the government should impose a tax on production equal to the externality cost to ensure that the market will achieve the socially optimal outcome. Select one: True False b. The socially optimal level of emissions of most pollutants is zero. Select one: True False c. Externalities are only inefficient when they impose a cost. They are not inefficient when they bestow a benefit. Select one: True Falsearrow_forwardIf 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_forwardDetermine whether the actions below correct positive, negative externalities or neither: A. Correct positive externalities B. Correct negative externalities C. Correct neither 1. government control of the prices in the market 2. Subsidize production in the market ? ✓ 3. Increase the cost of production in the market ? ?arrow_forward
- Why is a price change NOT an externality? Select one: a. A price change affects bystanders, not market participants. b. A price change does NOT change total costs or benefits, it only changes who buys the good. c. A change in price changes the marginal benefit of a good but does NOT change who buys and sells the good. d. A price change redistributes costs but not benefits.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_forwardAn 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 beneficial, 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. Adjust one or both of the curves to reflect the presence of the externality. If the social cost of producing the good is not equal to the private cost, then you should drag the supply curve to reflect the social costs of producing the good; similarily, if the social value of producing the good is not equal to the private value, then you should drag the demand curve to reflect the social value of consuming the good. Supply Demand Supply Demand QUANTITY (Units) PRICE (Dollars per unit)arrow_forward
- What is the externality in the market for alcohol? Draw a market diagram for alcoholic beverages, including private and social cost curves and private and social value curves. Identify the market equilibrium quantity, the socially optimal quantity, and thedeadweight loss associated with the externality. What policies do governments use to try to eliminate the externality associated with drinking DRAW PICTURE PLUS STEP BY STEP HOW TO DRAW IT Draw a market diagram for alcoholic beverages, including private and social cost curves and private and social value curves Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardhow do you read this type of graph and know whats going onarrow_forwardDue to a firm generating external costs (a negative externality), the government decides to ________ the firm. In response, the firm will produce ________ units of output in order to continue maximizing profits and reach the new producer equilibrium. Question 4Answer a. tax; fewer b. subsidize; more c. tax; more d. subsidize; fewerarrow_forward
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