Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 4, Problem 6P
To determine
The optimal quantity of public good.
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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.
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.
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.
Chapter 4 Solutions
Microeconomics
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
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- PRICE (Dollars per unit of electric cars) 500 450 400 350 300 250 200 150 100 50 0 H 0 O □ 1 0 ■ The market equilibrium quantity is O 3 5 QUANTITY (Units of electric cars) ☐ Supply (Private Cost) 6 Demand (Private Value) Social Cost units of electric cars, but the socially optimal quantity of electric car production is To create an incentive for the firm to produce the socially optimal quantity of electric cars, the government could impose a per unit of electric cars. units. of 1arrow_forwardRefer to Figure 11-1. If the external cost of producing the good is not taken into account, what is the deadweight loss in the market? Figure 11-1. Price O O 8 7 5 0 $2 $4 $5 $10 $15 8 10 15 17 O C2 C1 Quantityarrow_forwardP = 16-.25Q MC = 2 + .25Q Production creates an external benefit equal to $2 per unit. What price and quantity maximize profit in this market? O28, $10 28, $9 O 24, $9 O 24, $10arrow_forward
- QUESTION 19 28 24 20 16 12 8 4 P 0 4 8 S1 12 16 19. A possible explanation for supply shifting from S1 to S2 is O a) an improvement in technology. b) a decrease in demand. an increase in demand. d) an increase in the cost of energy. e) an increase in the number of buyers. D1 - 20 S2 D2 24 O QUESTION 20 20. Given that the U.S. government mandates the use of ethanol as a partial substitute for gasoline, and that ethanol manufactured in the U.S. is made from corn, what will happen if scientists develop a new highly efficient method of storing electrical energy? O a) Demand for ethanol will increase b) Demand for ethanol will decrease c) Supply of ethanol will increase d) Supply of ethanol will decrease e) None of the abovearrow_forwardThe requirement that a firm adopt a particular technology to reduce emissions is an example of O 1) Command-and-control policies 2) Market-based policies O 3) Externalities O 4) Internalitiesarrow_forwardPrice per bin 120 110 100 90 80 70 60 50 40 30 20 10 O $0 D2 10 20 30 40 50 60 70 80 90 100 Bins of peaches Suppose the figure represents the market for peaches and there are no externalities in the market. Suppose a sales tax of $40 per bin of peaches is levied on consumers of peaches. The new demand curve is labeled D2. Consumer surplus after the tax is: O $1000 D1 $300 O $100arrow_forward
- Price at a ~ a X b a Q₂ Q3 Q4 Collective quantity demanded and supplied 0 S Refer to the above supply and demand graph for a public good. Assume that the economy currently produces this public good at a quantity Q 3. Based on this information we can conclude that the: O a. total benefit of this public good is less O b. total benefit of this public good is greater than the total cost, so society should than the total cost, so society should produce less of the good. produce more of the good. O c. marginal benefit of this public good is greater than the marginal cost, so society should produce less of the good. O d. marginal benefit of this public good is less than the marginal cost, so society should produce less of the good.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_forwardThe 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)arrow_forward
- 210 " 40 " What kind of externality is present in this market? O a. A negative consumption externality of x-10. Ob. A positive consumption externality of x = 20. Oc. A positive consumption externality of x = 10. Od. A negative consumption externality of x-20. #1 • Supply(P-40+Q₂) 10 " Demand (P-200-Q Social Marginal Benefit P-20-9. 200 9 210 Q Suppose the government imposas a policy (tax or subsidy) such that the new Supply curve lies on the Social Marginal Cost curve. What area represents the government revenue or expenditure from this policy? Ⓒa.DIGH Ob. E-H ⒸI+G+D+E+H+K Ⓒd.E+HIKarrow_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_forwardSuppose that the demand and supply functions for a good are given as follows: Demand: 0 = 600-5P Supply: 0 Suppose now that government imposes $27 tax per unit of output on sellers. What is the burden on sellers? =-300+4P O 27 12 15arrow_forward
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