Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 10, Problem 2PA
Sub part (a):
To determine
The positive externality of fire extinguishers.
Sub part (b):
To determine
The positive externality of fire extinguishers.
Sub part (c):
To determine
The positive externality of fire extinguishers.
Sub part (d):
To determine
The positive externality of fire extinguishers.
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Consider the market for fire extinguishers.a. Why might fire extinguishers exhibit positive externalities?b. Draw a graph of the market for fire extinguishers, labeling the demand curve, the social-value curve, the supply curve, and the social-cost curve.c. Indicate the market equilibrium level of output and the efficient level of output. Give an intuitive explanation for why these quantities differ.d. If the external benefit is $10 per extinguisher, describe a government policy that would yield the efficient outcome.
#2. When pollution (a negative externality) is created by firms, which of the following is NOT a valid way
for the government to restore the social optimum?
a. require firms to install pollution-abatement equipment
b. require firms to change production techniques to reduce emissions
c. levy a tax on the production of the good
d. require firms to pay for the environmental damage they create
e. offer a subsidy to firms to reduce their production costs
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
False
Chapter 10 Solutions
Essentials of Economics (MindTap Course List)
Ch. 10.1 - Prob. 1QQCh. 10.2 - Prob. 2QQCh. 10.3 - Prob. 3QQCh. 10 - Prob. 1CQQCh. 10 - Prob. 2CQQCh. 10 - Prob. 3CQQCh. 10 - Prob. 4CQQCh. 10 - Prob. 5CQQCh. 10 - Prob. 6CQQCh. 10 - Prob. 1QR
Ch. 10 - Prob. 2QRCh. 10 - Prob. 3QRCh. 10 - Prob. 4QRCh. 10 - Prob. 5QRCh. 10 - Prob. 6QRCh. 10 - Prob. 1PACh. 10 - Prob. 2PACh. 10 - Greater consumption of alcohol leads to more motor...Ch. 10 - Prob. 4PACh. 10 - The many identical residents of Whoville love...Ch. 10 - Prob. 6PACh. 10 - Prob. 7PACh. 10 - Prob. 8PACh. 10 - Prob. 9PA
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Similar questions
- Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and output. a. Assuming that the production of televisions generates external costs, illustrate the effect of the producers being forced to pay a tax equal to the external costs generated, and indicate the equilibrium output. b. If instead of generating external costs, television production generates external benefits, illustrate the effect of the producers being given a subsidy equal to the external benefits generated, and indicate the equilibrium output.arrow_forwardShow the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Fe and Qe. On the graph, shade in the deadweight loss at the market output.arrow_forwardGreater consumption of alcohol leads to more motor vehicle accidents and, thus, imposes costs on people who do not drink and drive. a. Illustrate the market for alcohol, labeling the demand curve, the social-value curve, the supply curve, the social-cost curve, the market equilibrium level of output, and the efficient level of output. b. On your graph, shade the area corresponding to the deadweight loss of the market equilibrium. (Hint: The deadweight loss occurs because some units of alcohol are consumed for which the social cost exceeds the social value.) Explain.arrow_forward
- What is the concept of a negative externality in economics? A. A benefit received by individuals who did not incur the cost B. A cost incurred by individuals who did not receive the benefit C. A situation where external parties receive equal benefits and costs D. A situation where the government intervenes in the marketarrow_forwardConsider the market for fire extinguishers.a. Why might fire extinguishers exhibit positiveexternalities?b. Draw a graph of the market for fire extinguishers,labeling the demand curve, the social-value curve,the supply curve, and the social-cost curve.c. Indicate the market equilibrium level of outputand the efficient level of output. Give an intuitiveexplanation for why these quantities differ.d. If the external benefit is $10 per extinguisher,describe a government policy that would yield theefficient outcome.arrow_forwardProblem 1: Externality The weekly supply and demand for packs of cigarettes in the United States is given in the figure below. Suppose cigarette smoking causes an external cost on nonsmokers, as shown by the social benefit curve on the graph. Price ($) 36 34 32 30 - 28 26 - 24 22 - EMC S SEMC pvt 20 - 18- 16 - 14 - 12 - 10- 8 MB pvt social 2 MB 10 12 14 16 18 20 22 24 26 28 30 32 Pack of cigarettes (millions) a. This is a [ Select ] [ Select ] externality.arrow_forward
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