Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 17.2, Problem 2RQ
To determine
Relevance of external cost.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Explain the concept of an externality. Explain and show graphically how externalities lead to market failure and an inefficient allocation of resources.
Explain the difference between a positive externality and a negative externality. Can both types of externalities result in market failure? Why or why not?
The diagram to the right shows the perfectly competitive market for honey. The demand curve shows
the marginal benefit to society of consuming an extra unit of honey. The supply curve shows the
marginal costs of producing an extra unit of honey.
However, suppose that, as a by-product to producing honey, honeybees pollinate flowers, allowing more
flowers to grow and bloom. Suppose that for each unit of honey produced, one unit of flowers is
also created, providing an external benefit of $6.
Use the line drawing tool to draw and label the social marginal cost curve. (Make sure that the curve's
one end extends to the output level 18 and it crosses the demand curve.)
Carefully follow the instructions above, and only draw the required objects.
C
Price of Honey ($)
20.00-
18.00-
16.00-
14.00-
12.00-
10.00-
8.00-
6.00-
4.00-
2.00-
0.00-
0
-N
2
4
6 8 10 12 14
Quantity of Honey
S = MCp
16
D = MB
18 20
Chapter 17 Solutions
Macroeconomics
Ch. 17.1 - Prob. 1RQCh. 17.1 - Prob. 2RQCh. 17.2 - Prob. 1RQCh. 17.2 - Prob. 2RQCh. 17.2 - Prob. 3RQCh. 17.2 - Prob. 4RQCh. 17.3 - Prob. 1RQCh. 17.3 - Prob. 2RQCh. 17.3 - Prob. 3RQCh. 17.4 - Prob. 1RQ
Ch. 17.4 - Prob. 2RQCh. 17.4 - Prob. 3RQCh. 17.4 - Prob. 4RQCh. 17 - Prob. 1SPACh. 17 - Prob. 2SPACh. 17 - Prob. 3SPACh. 17 - Prob. 4SPACh. 17 - Prob. 5SPACh. 17 - Prob. 6SPACh. 17 - Prob. 7SPACh. 17 - Prob. 8SPACh. 17 - Prob. 9SPACh. 17 - Prob. 10APACh. 17 - Prob. 11APACh. 17 - Prob. 12APACh. 17 - Prob. 13APACh. 17 - Prob. 14APACh. 17 - Prob. 15APACh. 17 - Prob. 16APACh. 17 - Prob. 17APACh. 17 - Prob. 18APACh. 17 - Prob. 19APACh. 17 - Prob. 20APACh. 17 - Prob. 21APACh. 17 - Prob. 22APACh. 17 - Prob. 23APACh. 17 - Prob. 24APACh. 17 - Prob. 25APACh. 17 - Prob. 26APACh. 17 - Prob. 27APACh. 17 - Prob. 28APACh. 17 - Prob. 29APACh. 17 - Prob. 30APA
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Describe why competitive market can be failed due to the presence of the public goods.arrow_forwardDefine negative and positive externalities and their effect on resource allocation.arrow_forwardTo produce honey, beekeepers place hives of bees in the fields of farmers. As bees gather nectar, they pollinate the crops in the fields, increasing the yields of these fields at no additional cost to the farmer. a) Is this an externality in consumption or production? b) Is this a negative or positive externality? c) If this externality is not internalized, would beekeepers produce more or less bees than socially optimal? Why? d) Suggest a market-based solution that would internalize the externality. In your answer, give reference to the social cost and social value curves. e) What might be a reasonable private solution to this externality and how might the solution be reached?arrow_forward
- Market demand is MWTP= 76 - 2Q. Market supply is MC = 12 + Q. Each unit transacted results in a $Q external cost. How many units does the market produce more than the efficient quantity?arrow_forwardHow does the external cost affect the supply and demand of market goods in terms of price and quantity?arrow_forwardThe market for used phones is perfectly competitive without externalities. Market demand is Q=235-2P and Market Supply is P=2Q+11. Suppose the Marginal Cost (MC) increases by $10 at every quantity. What is market Producer Surplus after this increase in MC? (Note: this question is not asking for the change in PS, just the PS after the increase in MWTP) Enter a number only, drop the $ signarrow_forward
- Define the concept of a negative externality and explain the nature of the negative externality in the fishing markets i.e. describe how the self-interested actions of a fishing company might adversely affect third parties without their consent.arrow_forwardAssume a perfectly competitive market with no externalities. The demand curve is P =52 - 0.06×Qd. The supply curve is P =0.06×Qs. In equilibrium, what is total surplus?arrow_forwardExplain the two causes of market failures. Given their definitions, could a market be affected by both types of market failures simultaneously?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
