(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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Price of a movie ticket $14 11 B) 16 C) 18 D) 19 9 8 6 14 16 Supply D₁ = marginal private benefit D₂= marginal social benefit 18 19 Quantity of movie tickets (hundreds per day) Figure 1 illustrates the market for movie tickets during a pandemic, where the government has decided it needs to restrict the sale of tickets for social distancing purposes. The figure illustrates an externality in consumption from going to a movie theater because the cost of spreading the virus is borne by other people. The demand curve showing marginal private benefit includes the chance of spreading the virus by contracting it while inside a movie theater. Question 1. Refer to Figure 1. The efficient equilibrium quantity of movie tickets is hundred per day. A) 14
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…
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)
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2. 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 tonne of paper imposes a constant external cost of $105 per tonne. The following graph shows the demand (private value) curve and the supply (private cost) curve for paper. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $105 per tonne. (?) paper) PRICE (Dollars per tonne 700 630 560 490 420 350 280 210 140 70 0 0 ◇ 1 0 2 O 3 e O O The market equilibrium quantity is 3.5 O QUANTITY (Tonnes of paper) D Supply (Private Cost) Demand (Private Value) 7 Social Cost tonnes of paper, but the socially optimal quantity of paper production is 3 To create an incentive for the firm to produce the socially optimal quantity of paper, the government could impose a tax tonne of…
Question TWO Two categories of public goods are non-rival consumption goods and non-excludable goods. Discuss the similarities and differences between these two types of goods. If a good is non-rival in consumption, does that mean that it is also non-excludable? If a good is non-excludable, does that mean it is non-rival in consumption? Why might the market produce non-rival goods inefficiently? Why might the market produce non-excludable goods inefficiently?
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6. A paper mill discharges chemicals into a river that washes the shores of a downstream resort area. The private cost, social cost, and marginal benefit associated with the production of paper are given by the following equations: PMC = 5 + Q, SMC = 10 + 2Q, and MB = 35 -0.5Q. a. Provide a labelled diagram to illustrate how the competitive free market will not produce the socially optimal amount of output. b. Illustrate the efficiency loss. C. Illustrate how a per-unit tax could be used to correct this problem.
5. The effect of negative externalities on the optimal quantityof 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 external cost of $210 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for paper. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $210 per ton. PRICE (Dollars per ton of paper) 700 630 560 490 420 350 280 210 140 70 0 0 ¶¶ 1 O 2 O 3 4 5 QUANTITY (Tons of paper) The market equilibrium quantity is 0 ☐ Supply (Private Cost) 6 Demand (Private Value) 7 Social Cost ? 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 could impose a of paper. tons. per ton
@ Refer to the table below, which describes the market for cigarettes in terms of marginal benefits, private marginal costs, and private+social marginal costs. Marginal benefits Private + social marginal costs $12 $8 $10 $10 $8 $12 $6 $14 $4 $16 Quantity 100 200 300 400 500 Calculate the equilibrium quantity of cigarettes that would be produced and sold if society incorporated the negative externalities of cigarettes by taxing cigarettes. Type your answer... == 3 80 F3 16 с $ 888 FA VER % DFL V 5 T G B FO MacBook Air Y Private marginal costs $4 $6 $8 $10 $12 H & 7 A tv NA F7 U N * 00 8 1 ( 9 M K F9 O O Aa zoom
Figure: Three Firms That Pollute Reference: Ref 16-3 Figure: Three Firms that Pollute (Figure: Three Firms that Pollute) Use Figure: Three Firms That Pollute. In the figure, at what tax rate would firm C produce positive amount of pollution? Select one: a. $400 b. $500 c. $700 d. $200