(Ref 35-3 Table: Externalities from Parks) Use Table 35-3: Externalities from Parks. The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. Suppose that parks result in positive benefits to the community as a whole but the marginal private benefit that any one individual in the community gets from parks is close to 0. Without government intervention, at the amount of land dedicated to the public park the marginal social benefit will be: O a. $100.- O b. $225. c. $0. O d. $150.

(Ref 35-3 Table: Externalities from Parks) Use Table 35-3: Externalities from Parks. The table shows the marginal social benefit and the marginal social cost of preserving various amounts of land in a city for a public park. Suppose that parks result in positive benefits to the community as a whole but the marginal private benefit that any one individual in the community gets from parks is close to 0. Without government intervention, at the amount of land dedicated to the public park the marginal social benefit will be: O a. $100.- O b. $225. c. $0. O d. $150.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3 Let the market supply (representing the marginal private cost) have the form: P(Q) = 1 + 3Q, and the inverse market demand (representing the marginal social benefit) has the form: P(Q) = 25 - Q. Suppose that the production of Q is characterized by a negative externality. The magnitude of the externality (marginal damage) is $4 per unit of Q. a) Find the equilibrium price, quantity, consumer surplus, and the producer surplus resulting from an unregulated market in Q. b) Compute the net economic benefit to society which results from an unregulated market in Q. Note: you need to account for the total damages resulting from an externality. c) What is the socially efficient quantity of Q? d) At the efficient allocation, what is the net benefit to society?
12. Bernard and Elton are neighbors. Bernard never mows his lawn, rakes his leaves, or trims his hedges. His overgrown yard is not only an eyesore, but it is pulling down the value of Elton's house. a) How could the Coase theorem be used to remedy this negative externality? b) Does it matter whether Bernard has the right to ignore his yard or Elton has the right to force him to clean it up?
3. The effect of negative externalities on the optimal quantity of consumption Consider the market for paper. Suppose that a paper factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additional ton of paper imposes a constant marginal external cost (MEC) of $175 per ton. The following graph shows the demand (marginal private benefits, or MPB) curve and the supply (marginal private costs, or MPC) curve for paper. Use the purple points (diamond symbol) to plot the marginal social costs (MSC) curve when the marginal external cost is $175 per ton. PRICE (Dollars per ton of paper) 500 450 400 350 300 250 200 150 100 50 0 0 O O 2 0 3 U 5 QUANTITY (Tons of paper) The market equilibrium quantity is O O 6 Supply (MPC) Demand (MPB) 7 MSC tons of paper, but the socially optimal quantity of paper production is To create an incentive for the firm to produce the socially optimal quantity of paper, the government…
Robert and Bruce have identical marginal private cost curves and demand curves and use the same amount of land to graze their mules. They both have access to a common grazing area, which must only be maintained on a volunteer basis. If they had to maintain the land, it would cost each person an additional $200. The maximum sustainable quantity of grazing animals on the land is 14. The graph depicts the marginal private cost curves and the farmers' individual demand curves, which are identical for 800 each farmer. Individual farmer's demand 700 600 Individual farmer's supply 500 400 300 200 100 10 12 14 16 18 20 Ouantity of Animals Cost ($) co
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Question 4 The private marginal benefit for commodity X is given by 10-X, where X is the number of units consumed. The private marginal cost of producing X is constant at $5. For each unit of X produced, an external cost of $2 is imposed on members of society. In the absence of any government intervention, how much X is produced? What is the efficient level of production of X? What is the gain to society involved in moving from the inefficient to the efficient level of production? Suggest a Pigouvian tax that would lead to the efficient level.
3. The effect of negative externalities on the optimal quantity of consumption Consider the market for steel. Suppose that a steel manufacturing plant dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the plant. Producing an additional ton of steel imposes a constant marginal external cost (MEC) of $165 per ton. The following graph shows the demand (marginal private benefits, or MPB) curve and the supply (marginal private costs, or MPC) curve for steel. Use the purple points (diamond symbol) to plot the marginal social costs (MSC) curve when the marginal external cost is $165 per ton. PRICE (Dollars per ton of steel) 1100 990 880 770 660 550 440 330 220 110 0 0 + 1 O ☐ O 2 0 H 3 ▬ The market equilibrium quantity is O 4 5 QUANTITY (Tons of steel) ☐ ☐ 6 Supply (MPC) Demand (MPB) 7 MSC ? tons of steel, but the socially optimal quantity of steel production is To create an incentive for the firm to produce the socially optimal quantity…
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Consider the market for trees in a public forest, illustrated in the figure to the right, where S, is marginal private cost and 600- D, is marginal private benefit. 550- Trees are an example of a common resource. 500- 450- Suppose that the use of trees in a public forest generates a negative externality of $75 per unit. 400- If so, then according to the figure, the optimal quantity of trees in a public forest for society is units. (Enter your 2 350- response as an integer.) 300- E 250- 200- E 150- 100- 50- 0- 10 11 12 13 Quantity of trees in a public forest Help Me Solve This eText Pages Get More Help - Clear All % & 8 Price of trees in a public forest (per ton)