Concept explainers
Refer to Table 12.2. The externality created by the refrigerator production was
However, once we accounted for both the private and additional external costs, the market price increased by only
If the external costs were
Trending nowThis is a popular solution!
Chapter 12 Solutions
Principles of Economics 2e
Additional Business Textbook Solutions
Managerial Accounting (5th Edition)
Principles of Accounting Volume 1
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Managerial Accounting (4th Edition)
Cost Accounting (15th Edition)
Horngren's Accounting (11th Edition)
- 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_forwardTable 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?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
- Consider the market for pharmaceuticals. Suppose that a pharmaceutical factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing additional pharmaceuticals imposes a constant per-unit external cost of $120. The following graph shows the demand (private value) curve and the supply (private cost) curve for pharmaceuticals. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $120 per unit. ? PRICE (Dollars per unit of pharmaceuticals) 800 720 640 560 480 400 3:20 240 160 80 0 0 O 1 O ☐ The market equilibrium quantity is O 2 3 5 QUANTITY (Units of pharmaceuticals) 4 6 Supply (Private Cost) Demand (Private Value) 7 Social Cost units of pharmaceuticals, but the socially optimal quantity of pharmaceuticals production is To create an incentive for the firm to produce the socially optimal quantity of pharmaceuticals, the government could impose a per unit of pharmaceuticals.…arrow_forwardIn the market for a certain pesticide, the following equations represent the private demand and supply: Private Demand: QD = 160 - P Private Supply: QS = 4P The use of this pesticide has a negative externality that affects nearby ecosystems, which is not reflected in the market price. The external cost is estimated to be $5 per unit of pesticide. By how much is the pesticide overconsumed under perfect competition? A) 1 units B) 3 units C) 4 units D) 5 units E) none of the abovearrow_forwardSide 19 A mine owner faces the following marginal cost (MC) function: MC= 100 +15*X Where X is tons of the mineral extracted The mining of the mineral has external costs. The marginal external cost (MEC) has the following function: MEC = 5*X Where X is the tons of the mineral extracted. The (marginal) price curve (PC) has the following function: PC= 600 -5*X Where X is tons of the mineral the bought What is the optimal extraction level in tons? Vælg én svarmulighed O 15 O 18 O 23 O 20arrow_forward
- Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
- Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningMacroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningEconomics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning