Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
20th Edition
ISBN: 9780078021756
Author: McConnell, Campbell R.; Brue, Stanley L.; Flynn Dr., Sean Masaki
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 6DQ
To determine
The positive externalities.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The accompanying diagram shows the supply and demand diagrams
for the competitive market for honey in one region. MC represents
private marginal cost and MB represents private marginal benefit.
Assume there are two types of firms in this region-beekeepers that
produce honey and orchard keepers that produce peaches. The bees
provide a benefit to the orchard keepers by pollinating their peach
trees.
If the external marginal benefit is $2 per unit of honey, then what is the
allocatively efficient output?
O A. 20 kg
B. 80 kg
C. 40 kg
D. 100 kg
E. 60 kg
C
Price ($ per kg)
12
11
10
8
20
MC2
MB
40 :60 :80
S=MCO
MC₁
MB₂
D=MBO
100
Quantity (kg of honey per month)
Suppose the equation for the demand curve in a market is P=100 – 2Q. Also, suppose the equation for the supply curve in the same market is P=10+3Q. Suppose there is an external cost of $20 associated with the
production of each unit of the good. The socially optimal quantity is
O 4 units smaller than the market equilibrium quantity.
O 22 units greater than the market equilibrium quantity
O 14 units smaller than the market equilibrium quantity
O 4 units greater than the market equilibrium quantity.
1.
Chapter 4
Market Failure Caused by Externalities
Page
94 Problem 1
Draw a supply and demand graph and
identify the areas of consumer surplus and
producer surplus. Given the demand curve,
how will an increase in supply affect the
amount of surplus shown in your diagram ?
Explain. LO4.1 (Differentiate between
demand-side market failures and supply-side
market failures.
Chapter 4 Solutions
Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
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 - Prob. 7RQCh. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7P
Knowledge Booster
Similar questions
- The graph shows the marginal social cost, supply, and demand curves in the hand sanitizer market. At what quantity could the government set a quota to control this externality? O 12 4 8.arrow_forwardConsider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The following table shows each resident's willingness to pay for each acre of the park. Acres 1 2 3 4 5 6 7 Sophia 0 acres O1 acre 2 acres 10 8 6 3 1 O3 acres 0 Willingness to Pay (Dollars) Amber Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?" 24 18 14 8 6 4 2 Cedric 6 5 4 3 2 1 0arrow_forwardAn apple grower’s orchard provides nectar to a neighbor’s bees, while the beekeeper’s bees help the apple grower by pollinating the apple blossoms. Use Figure 16.2b to explain why this situation of dual positive externalities might lead to an underallocation of resources to apple growing and to beekeeping. How might this underallocation get resolved via the means suggested by the Coase theorem?arrow_forward
- 3. Voluntary contributions toward a public goodLarry and Raphael are considering contributing toward the creation of a public park. Each can choose whether to contribute $400 to the public park or to keep that $400 for a new suit.Since a public park is a public good, both Larry and Raphael will benefit from any contributions made by the other person. Specifically, every dollar that either one of them contributes will bring each of them $0.80 of benefit. For example, if both Larry and Raphael choose to contribute, then a total of $800 would be contributed to the public park. So, Larry and Raphael would each receive $640 of benefit from the public park, and their combined benefit would be $1,280. This is shown in the upper left cell of the first table.Since a new suit is a private good, if Larry chooses to spend $400 on a new suit, Larry would get $400 of benefit from the new suit and Raphael wouldn't receive any benefit from Larry's choice. If Larry still spends $400 on a new suit and…arrow_forwardAssume citizens of Destrahan are complaining that Shell Chemical and Dow Chemical are polluting the environment. Currently, each firm emits 40 tons of pollution per year. Shell Chemical could reduce its pollution at a cost of $500 per ton, and Dow Chemical could reduce its pollution at a cost of $100 per ton. To reduce overall pollution to 40 units, the mayor gives each firm 20 tradable pollution permits. Each permit allows a firm to emit one ton of pollution. Assuming each permit has a market value is $200, what is the cost of reducing pollution to the desired level? a.$2,000 b.$4,000 c.$8,000 d.$10,000arrow_forwardThere are two firms, A and B emitting sulfur dioxide. In total, they emit 100 tons of sulfur dioxide. The EPA wants to reduce sulfur dioxide emissions by 60 tons so that the final level of emissions in only 40 tons. The table below shows the emissions and cost of abatement for each firm. If the EPA were to issue 40 tradeable pollution permits, 20 to each firm, where each pollution permit allows 1 ton of emission, what would the final allocation of permits across the two firms be if they traded permits with esch other? sO, Emission Cost per ton of so, reduction Company Firm A 30 tons $1,000 per ton Firm B 70 tons $800 per ton Total Emissions 100 tons Select an answer and submit. For keyboard navigation, use the up/down arow keys to select an answer. a Each firm will have 20 permits. b. Firm A will have all 40 permits. Firm A will have 30 permits and Firm B will have 10 permits. Firm A will have 10 permits and Firm B will have 30 permits.arrow_forward
- 7. Correcting for negative externalities - Taxes versus tradablepermits Nuclear facilities emit radioactive waste as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of electricity production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of radioactive waste). The following graph shows the daily demand for pollution rights. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Note: Once PRICE(Dollars perton) 23 8 70 49 42 35 21 14 7 0 Demand 0 40 80 120 160 200 240 280 320 360 400 QUANTITY (Millions of tons) Graph Input Tool Daily Demand…arrow_forwardQuestion 22 Let Q be quantity of beer (in packs) consumed in the US. Assume beer consumption imposes a negative externality of $30 per pack. The private demand for beer is P=150-2Q while the private supply curve is P=Q. If the government impose a $30 tax per pack what is the change in total surplus from before to after the imposition of the tax. -$150 beer, $150 O $1.350 o 51,350arrow_forwardTable 10-5 The following table shows the marginal costs for each of four firms (A, B, C, and D) to eliminate units of pollution from their production processes. For example, for Firm A to eliminate one unit of pollution, it would cost $54, and for Firm A to eliminate a second unit of pollution it would cost an additional $67. Firm Marginal Cost to Eliminate (Dollars) First Unit Second Unit Third Unit Fourth Unit A 54 67 82 107 В 57 68 86 108 54 66 82 107 D 62 73 91 111 Refer to Table 10-5. If the government wanted to reduce pollution from 16 units to 6 units, which of the following fees per unit of pollution would achieve that goal? a. $83 b. $68 C. $67 d. $81 0= Icon Keyarrow_forward
- Suppose that a cap-and-trade program features "grandfathering" of pollution rights for an industry where the mix of firms is very heterogeneous (large and small, old and new, labor-intensive and capital-intensive, etc.). To protect the smaller firms, each of those firms receives enough allowances to cover 100% of their desired emissions, while bigger firms receive only enough permits to cover 75% of their desired emissions. In this situation, smaller firms can just ignore the cap-and-trade program and carry on as before, because they do not need to buy any permits. Big firms, however, will struggle to cut back their emissions or figure out a way to get more permits. True, False, Uncertain? Explainarrow_forwardAssume that air pollution from a copper smelter:imposes externalcosts on people who live near the smelter. If the Coase theorem holds and the victims of the pollution could not legally enforce the right of their property not to be damaged, the amount of pollution reduction O would be significantly less than if the owners of the smelter were legally liable for damages. O would be less than the amount at which the marginal benefit of pollution reduction equaled the marginal cost. O would be the same as if it would be if the owners of the smelter were legally liable. O would be to0 small, the government would have to intervene to bring about an efficient outcome.arrow_forwardThis scenario pertains to microeconomics course-externalities focusing on Noise Pollution, which has negative effects on human health. As some scientific studies have shown, community members who are residing around airports have been exposed to frequent noise pollution. As a result, some people's stress levels increased leading to an increased risk of high blood pressure and heart disease. Now, assume that this has had happened in San Diego County, CA. The community members or residents sued SD Airport for producing negative externalities- noise pollution. The final decision or the court verdict was in the favor of the community members. But the judge has failed to come up with an economic model to calculate the total costs of negative externality- noise pollution. To construct the model, the Judge has employed economists to come up with the model to measure the total amount of compensation per household identifying who should get how much, and what factors determine the dollar amount…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
