The private marginal benefit associated with a product’s consumption is PMB = 360–4Q and the private marginal cost associated with its production is PMC = 6Q. Furthermore, the marginal external damage associated with this good’s production is MD =2Q. To correct the externality, the government decides to impose a tax of T per unit sold. What tax T should it set to achieve the social optimum?

Offer an example of a good or service with a negative externality. What is the externality of the good or service you mentioned?

The following is a copy of the information from Question 1: Consider Product NE, which has a negative externality associated with its production and use ( i.e., the “Incidental Cost” ( IC) of each unit of Product NE is greater than zero). You are told that :                              * The “Efficient” Output of Product NE = 9000 units                              * The Free-Market Equilibrium Output of Product NE = 10,000 units                              * The Consumer’s Surplus + Producer’s Surplus on Unit Number 6000 ( i.e., on that one unit ALONE) is equal to $ 70 ( i.e., the sum of CS + PS = $ 70)                              * The Cumulative Surplus on the first 9000 units produced is equal to $ 175,000 ( i.e., the sum of the surplus( to society) on ALL 9000 units adds up to $ 175,000) Is the Cumulative Surplus on the first 10,000 units ( i.e., ALL 10,000 units together) greater than $ 175,000, less than $ 175,000, or exactly equal to $ 175,000 ?   a. Greater Than $…

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?

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 external cost of $165 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for steel. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $165 per ton. 1100 990 Social Cost 880 770 Supply (Private Cost) 660 550 440 330 220 Demand 110 (Private Value) 1 2 4 7 QUANTITY (Tons of steel) PRICE (Dollars per ton of steel)

Consider the supply & demand diagram below representing the market for food among the obese population. Understand that there is a consumption-related externality among the obese population. Before any policy is introduced, what area(s) on the chart represent consumer surplus? DEU Obese Group a MSC K d MEC b C MPC MPB=MSB Q₁ Q₂ Price P₂ 2 P₁ a C d None of the above Quantity

Public wifi hotspots grant many external benefits on society: more equitable access to the internet, increased educational opportunities, and so on. Therefore, the market equilibrium quantity of public wifi hotspots does not equal the socially optimal quantity. The following graph plots the demand for public wifi hotspots (their private value), the supply of public wifi hotspots (the private cost of producing them), and the social value of public wifi hotspots, including both the private value and external benefits. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.

How does the price elasticity of demand for gasoline impact the effectiveness of taxes on gasoline aimed at correcting a negative externality?

Please answer parts e and f below.

What is an externality? Provide two examples each of positive and negative externalities.