PRINCIPLES OF MICROECONOMICS (OER)
2nd Edition
ISBN: 9781947172340
Author: Timothy Taylor, Steven A. Greenlaw
Publisher: OpenStax
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Textbook Question
Chapter 13, Problem 24P
Assume that the marginal private costs of a film producing fuel-efficient can; is greater than the marginal
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QUESTION 6
Figure 10-3
PRICE
000
22222S
20
18
16
14
10
8
6
4
Social Value
Demand,
246 8 10 12 14 16 18 20
QUANTITY
Refer to Figure 10-3. If the government wanted to tax or Iubsidize this good to achieve the socially optimal level of output, it would
a introduce a subsidy of $2 per unit.
Supply
b. impose a tax of $2 per unit.
c. introduce a subsidy of $4 per unit.
d, impose a tax of $4 per unit.
Explain how a government can use a tax on dry
cleaning to bring about the efficient level of production.
OA. The government can use a tax to decrease the
marginal private benefit of consuming dry
cleaning to equal the marginal social benefit.
OB. The government can use a tax to decrease the
marginal social cost of producing dry cleaning
to equal the marginal private cost.
OC. The government can use a tax to increase the
marginal private cost of producing dry cleaning
to equal the marginal social cost
OD. The government can use a tax to increase the
marginal private benefit of consuming dry
cleaning to equal the marginal social benefit.
OE. The government can use a tax to decrease the
marginal private cost of producing dry cleaning
to equal the marginal social cost
What should the value of the tax be? The tax should
be $ per unit (Enter your response rounded to two
decimal places)
How large is the deadweight loss (in dollars) from
excessive dry cleaning, according to the figure? The…
Externalities: End of Chapter Problem
In Chapter 6, we said that taxes create deadweight losses. When we tax goods with external costs, should we worry about
deadweight losses? Why or why not?
Any deadweight losses
O should not conern us. Deadweight losses are the result of transactions that no longer occur and the problem with
negative externalities is that too many transactions occur.
O should concern us. If there is a negative externality associated with a good, the deadweight loss from a tax simply
exacerbates society's welfare costs.
from a tax are counter-productive. Why would we tax goods with negative externalities when the remedy for a negative
externality is a subsidy?
should concern us. Deadweight losses sound bad because they are bad; we should always avoid deadweight losses.
Chapter 13 Solutions
PRINCIPLES OF MICROECONOMICS (OER)
Ch. 13 - Do market demand curves reflect positive...Ch. 13 - Suppose that Sonys R. Is this a private or social...Ch. 13 - The Gizmo Company is planning to develop new...Ch. 13 - The Junkbuyers Company travels from home to home,...Ch. 13 - When residents in a neighborhood tidy it and keep...Ch. 13 - Education provides both private benefits to those...Ch. 13 - Which of the following goods or services are...Ch. 13 - Are the following goods non-rival in consumption?...Ch. 13 - In what ways (it) company investments in research...Ch. 13 - Will the demand for borrowing and investing in R&D...
Ch. 13 - Why might private markets tend to provide too few...Ch. 13 - What can government do to encourage the...Ch. 13 - What are the two key characteristics of public...Ch. 13 - Name two public goods and explain why they are...Ch. 13 - What is the free rider problem?Ch. 13 - Explain why the federal government funds national...Ch. 13 - Call a company be guaranteed all of the Social...Ch. 13 - Is it inevitable that government must become...Ch. 13 - How do public television stations, like PBS, try...Ch. 13 - Why is a football game on ESPN a quasi-public good...Ch. 13 - Provide two examples of goods/services that are...Ch. 13 - Radio stations, tornado sirens, light houses, and...Ch. 13 - HighFlyer Airlines wants to build new airplanes...Ch. 13 - Assume that the marginal private costs of a film...Ch. 13 - Becky and Sarah are sisters 1who share a room....
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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_forwardThe figure below shows supply and demand for planting trees, based on private costs and benefits. Trees sequester carbon, meaning that they help counteract pollutants that contribute to climate change. Price of trees (S) 22114 20 18 16 12 10 8 6 4 2 0 MCpvt D-MBMB, 10 20 30 40 50 60 70 80 90 100 Quantity of trees Tools Social Cost DWLarrow_forward
- According to the Coase theorem,a. private actors can reach agreement to solve theproblem of externalities without the government.b. corrective subsidies are the best policy to solvethe problem of positive externalities.c. negative externalities are a problem for societybut positive externalities are not.d. when two private actors amicably solve theproblem of externalities, they shift the problem toa third partyarrow_forwardDon't give handwritten answers please and Do bo a. Draw the demand, supply, and social marginal cost curves on the same graph. b. What is the socially efficient quantity of the good? Show your work.arrow_forwardQuestions 12 & 13 relate to the following graph: $ P3 P₂ 12 13 P₁ The graph best represents: Q₁ Qo a. Negative production externality b. Positive production externality c. Negative consumption externality d. Positive consumption externality According to the graph, which price and quantity combination represents the social optimum? a. P₁, Q₁ b. P₂, Q₁ C. P₁, Qo d. P₂, Qo Social Cost A A Private Cost Demand Quantity B B D C Darrow_forward
- Refer to the above table and answer the question on the basis of the given information for a public good. TH Quantity 1 PR $10 Ps $8 2 7. 7 3 5 6 4 3 5 1 4 PRand Psare the prices that Rafael and Sarah, respectively, are willing to pay for the marginal unit of a public good, rather than do without it. Rafael and Sarah are the only members of society. Now suppose the public good can be provided by the government at a constant marginal cost of $10. The optimal quantity of the public good is: 1) 1 unit. 2) 2 units. 3) 3 units. 4) 4 units. vonlstarrow_forwarda. How much does consumers surplus rise when the government completely subsidizes bike trips? B. How much do external benefits increase when the government completely subsidized bike trip? C. Do Social benefits outweigh the social costs of this subsidv? By how mucharrow_forward
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