Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 6RQ
To determine
Positive and negative externalities.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
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…
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.
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 1
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
Knowledge Booster
Similar questions
- The 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_forward1. 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.arrow_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
- 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_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_forward7. Correcting for negative externalities - Taxes versus tradablepermits Paper factories emit chemicals 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 paper 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 chemicals). 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. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per ton) 90 81 72 54 45 36 27 18 9 0 0 f 35 70 āt Demand 105 140 175 210 245 280 315 350 Graph Input Tool Daily Demand for Pollution Rights Price (Dollars per ton)…arrow_forward
- For each of the following statements indicate if there is/could be an externality problem. Explain why or why not. lf there is, what type is it (positive, negative or both)? Determine if the Coase's theorem will be a perfect solution to the problem. Explain why or why not a. Carbon emission from vehicles. b. Your hostel neighbor throwing an awesome, but loud party. C. Completing your university degree. d. A mobile phone rings loudly in the class.arrow_forwardA strategy for consumer 1 in the private provision of public goods model is: A quantity of public good purchases for each level of public good purchases of consumer 2. A quantity of public good purchases. A quantity of public good purchases that maximises 1's utility for each level of public good purchases of consumer 2. The total quantity of public goods consumed by consumer 1. O O O Oarrow_forwardThe 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_forward
- Refer to the above supply and demand graph of Product X. Q, Quantity of Product X What would happen if the government taxed the producers of this product because it has negative externalities in production? O 1) Supply would increase. 2) Demand would decrease. O 3) Price would decrease. 4) Supply would decrease. Pricearrow_forwardWhich statement about externalities is wrong? O Markets are typically not efficient in dealing with externalities O Externalities can be positive or negative O A firm naturally takes into account negative externalities that result from their production O Interventions such as carbon taxes can help correct externalities gative externalities imply that the social cost is high than the internal (or private) costarrow_forward5. Suppose that Capsule Corporation and Red Ribbon Company are producers of spaceships. In their production processes, each firm emits 50 units of pollution. Now, the government wants to reduce smoke emissions by 40% by issuing tradable permits. The cost of abatement of Capsule Corporation is Php 50 per unit of pollution, while the cost of abatement of Red Ribbon Company is Php 30. Suppose the tradable permits sell at Php 40 and the government allocates the permits equally between the two firms. a. If Red Ribbon Company sells 10 permits to Capsule Corporation, what is the total cost in achieving the goal of reducing emissions by 40%? Instead of using tradeable permits, the government regulates the firms by forcing them to emit 30 units of pollution each. What is the total cost of this policy? What policy is more efficient to implement, the tradeable permits or the government regulation? b. c.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
