Macroeconomics: Principles, Problems, & Policies
20th Edition
ISBN: 9780077660772
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 4, Problem 5P
Subpart (a):
To determine
The market demand for public and private goods.
Subpart (b):
To determine
The market demand for public and private goods.
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On the basis of the three individual demand schedules below, and assuming these three people are the only ones in the society, determine ( a) the market demand schedule on the assumption that the good is a private good and (b) the collective demand schedule on the assumption that the good is a public good. Explain the differences, if any, in your schedules.
On the basis of the three individual demand schedules in the following table, and assuming these three people are the only ones in the society, determine (a) the market demand schedule on the assumption that the good is a private good and (b) the collective demand schedule on the assumption that the good is a public good.
An externality arises when a firm or person engages in an activity that affects the wellbeing of a
third party, yet neither pays nor receives any compensation for that effect. If the impact on the
third party is adverse, it is called a
externality.
The following graph shows the demand and supply curves for a good with this type of externality.
The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good.
Adjust one or both of the curves to refiect the presence of the externality. If the social cost of
producing the good is not equal to the private cost, then you should drag the supply curve to
reflect the social costs of producing the good; similarly, if the social value of producing the good is
not equal to the private value, then you should drag the demand curve to reflect the social value of
consuming the good.
-O-
Supply
Demand
Supply
Demand
QUANTITY (Unts)
With this type of externality, in the absence of government intervention, the market…
Chapter 4 Solutions
Macroeconomics: Principles, Problems, & Policies
Ch. 4.A - Prob. 1ADQCh. 4.A - Prob. 2ADQCh. 4.A - Prob. 3ADQCh. 4.A - Prob. 1ARQCh. 4.A - Prob. 2ARQCh. 4.A - Prob. 3ARQCh. 4.A - Prob. 1APCh. 4 - Prob. 1DQCh. 4 - Prob. 2DQCh. 4 - Prob. 3DQ
Ch. 4 - Prob. 4DQCh. 4 - Prob. 5DQCh. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - Prob. 8DQCh. 4 - Prob. 9DQCh. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Use marginal cost/marginal benefit analysis to...Ch. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7P
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