Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 5.2.9PA
To determine
Is the policy economically efficient or not.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
come up with your own example of positive externality and then another example of negative externality. Briefly explain why they can be considered externalities.
ECONOMICS
Please Show Your Work With an Explanation
This problem set explores what happens to pricing when we add network effects, which are a specific form of positive externality.
You’ve invented a 3D fax machine. This cool technology is almost like a Star Trek teleporter. You can scan an object at one machine, which creates an exact copy at another 3D fax machine. It is so valuable that as more people use it, it becomes more valuable, and the price any given user is willing to pay increases in turn.
Consider a scenario in which there are 12 possible users, who each value the fax machine at i*n, where i is the index of that user (from 1 to 12), and n is the number of other purchasing users. So, if no one buys the 3D fax machine, everyone values it at 0. However, as soon as one person buys the device, then the 12 possible users begin to value the product at 1, 2, … 12, respectively. If 2 people purchase, the 12 possible users’ valuations increase to 2, 4, … 24, and so on. Because…
What are the three types of Efficiency necessary to achieve Economic Efficiency?
Chapter 5 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 5 - Prob. 5.1.1RQCh. 5 - Prob. 5.1.2RQCh. 5 - Prob. 5.1.3RQCh. 5 - Prob. 5.1.4RQCh. 5 - Prob. 5.1.5RQCh. 5 - Prob. 5.1.6PACh. 5 - Prob. 5.1.7PACh. 5 - Prob. 5.1.8PACh. 5 - Prob. 5.1.9PACh. 5 - In a study at a large state university, students...
Ch. 5 - Prob. 5.1.11PACh. 5 - Prob. 5.1.12PACh. 5 - Prob. 5.1.13PACh. 5 - Prob. 5.2.1RQCh. 5 - Prob. 5.2.2RQCh. 5 - Prob. 5.2.3RQCh. 5 - Prob. 5.2.4PACh. 5 - Prob. 5.2.5PACh. 5 - Prob. 5.2.6PACh. 5 - Prob. 5.2.7PACh. 5 - Prob. 5.2.8PACh. 5 - Prob. 5.2.9PACh. 5 - Prob. 5.2.10PACh. 5 - Prob. 5.2.11PACh. 5 - Prob. 5.3.1RQCh. 5 - Prob. 5.3.2RQCh. 5 - Prob. 5.3.3RQCh. 5 - Prob. 5.3.4PACh. 5 - Prob. 5.3.5PACh. 5 - Prob. 5.3.6PACh. 5 - Prob. 5.3.7PACh. 5 - Prob. 5.3.8PACh. 5 - Prob. 5.3.9PACh. 5 - Prob. 5.3.10PACh. 5 - Prob. 5.3.11PACh. 5 - Prob. 5.3.12PACh. 5 - Prob. 5.3.13PACh. 5 - Prob. 5.3.14PACh. 5 - Prob. 5.3.15PACh. 5 - Prob. 5.3.16PACh. 5 - Prob. 5.4.1RQCh. 5 - Prob. 5.4.2RQCh. 5 - Prob. 5.4.3RQCh. 5 - Prob. 5.4.4PACh. 5 - Prob. 5.4.5PACh. 5 - Prob. 5.4.6PACh. 5 - Prob. 5.4.7PACh. 5 - Prob. 5.4.8PACh. 5 - Prob. 5.4.9PACh. 5 - Prob. 5.4.10PACh. 5 - Prob. 5.4.11PACh. 5 - Prob. 5.4.12PACh. 5 - Prob. 5.1CTECh. 5 - Prob. 5.2CTE
Knowledge Booster
Similar questions
- From the book: Omnivore's Dilemma, chapters 9-12 for a discussion board A) In an economic transaction between a producer and a consumer, an externalized cost or (negative) externality is a cost to someone who is not involved in the transaction. For example, the consumer doesn't pay for it, and the producer doesn't pay for it. Joel Salatin alludes to this concept when he talks about food that is not “honest.” List three externalized costs associated with food production (and consumption), and try to identify the third part(ies) likely to pay for each. Which cost on your list concerns you the most?arrow_forwardTable 17-1Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below: Quantity(in gallons) Price Total Revenue(and Total Profit) 0 $60 $0 100 55 5,500 200 50 10,000 300 45 13,500 400 40 16,000 500 35 17,500 600 30 18,000 700 25 17,500 800 20 16,000 900 15 13,500 1,000 10 10,000 1,100 5 5,500 1,200 0 0 Refer to Table 17-1. If this market for water were perfectly competitive instead of…arrow_forwardThree roommates, Alan, Billy and Casey, are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Table below indicates their willingness to pay for each movie: 1st movie 2nd movie 3rd movie 4th movie 5th movie Alan $20 $10 $0 $0 $0 Billy $30 $20 $10 $0 $0 Casey $50 $40 $30 $20 $10 Explain why some people believe that the showing of a movie within the dorm room is a public good.arrow_forward
- Draw a graph that models a positive externality in consumption (label and clearly explain graph) Explain: i) The difference between the competitive equilibrium quantity and the socially optimal level quantity. ii) A possible intervention to bring the competitive equilibrium quantity closer to the socially optimal quantity. iii) An example of a setting in which this type of externality might occur (explain clearly how/why this externality happens).arrow_forwardQuestion 3 Professor Paudel shows the graph for the case of negative externalities in the class. He wants the class to think about positive externalities as well. This got him thinking a lot about potential market failure due to positive production externality in the oil exploration market. Specifically, in his research, he found that expenditures on oil exploration by any company can have a positive externality because they offer more profitable opportunities for other companies. Professor Paudel wants you to enlighten him on the following issues: a) Graphically show private and social marginal cost functions and the demand curve. b) Under positive externalities as mentioned above, is the social marginal cost below than the private marginal cost? Explain and support your answers with the help of a clearly labeled graph. c) Under positive externalities as mentioned above, what's the relationship between social optimum quantity and the competitive market equilibrium quantity? Is there…arrow_forwardBriefly explain what is meant by the term "externality" and how it occurs. a. What are the two types of externalities? b.How does government fix both of these issues? c. Is government intervention necessary? Why or why not?arrow_forward
- Subway rides during rush hour The subway system in your city is approximately in equilibrium. Given current schedules, riders don't wait long for a train. Platforms are busy but not overcrowded. In other words, rush-hour fares are such that the quantity of rides supplied is about equal to the quantity demanded. The directors of the system now come up with an idea to get more people out of their cars and into the trains. Each time a rider buys a ride, 50 cents will be automatically deposited into the rider's bank account. The funding for this subsidy is to come from diverting a portion of gasoline taxes now paid by motorists. If this scheme works to increase ridership, the system is ready to provide more rides and to adjust fares as needed to keep the system in approximate equilibrium. When the plan goes into effect, what is likely to happen in the diagram above? Select one: O a. D will increase, resulting in more rides at a higher fare. O b. S will increase, resulting in more rides at…arrow_forwardJohn Cassidy, a writer for the New Yorker magazine, wrote a blog post arguing against New York City’s having installed bike lanes. Cassidy complained that the bike lanes had eliminated traffic lanes on some streets as well as some on-street parking. A writer for the Economist magazine disputed Cassidy’s argument with the following comment: “I hate to belabor the point, but driving, as it turns out, is associated with a number of negative externalities.” What externalities are associated with driving? How do these externalities affect the debate over whether big cities should install more bike lanes? J. Cassidy. Battle of the Bike Lanes. New Yorker, March 8, 2011. The World Is His Parking Spot. Economist, March 9, 2011. Initial Response should be at least 250 words and should include at least one reference in APA format. The Peer Response should be at least 100 words and add value.arrow_forwardThere are three industrial firms in Happy Valley.The government wants to reduce pollution to 60 units, so it gives each firm 20 tradablepollution permits.a. Who sells permits and how many do they sell? Who buys permits and how many dothey buy? Briefly explain why the sellers arid buyers are each willing to do so. What isthe total cost of pollution reduction in this situation?b. How much higher would the costs of pollution reduction be if the permits could notbe tradedarrow_forward
- There are three industrial firms in Kitona. The Government wants to reduce pollution to 120 units, so it gives each firm 40 tradable pollution permits. Firm Initial Pollution Level Cost reducing pollution by 1 unit A 70 Units $20 B 80 Units $25 C 50 Units $10 Who sells permits and how many do they sell? Who buys permits and how many do they buy? Briefly explain why the sellers and buyers are each willing to do so. What is the total cost of pollution reduction in this situation?arrow_forwardThere are three industrial firms in Kitona. The Government wants to reduce pollution to 120 units, so it gives each firm 40 tradable pollution permits. Firm Initial Pollution Level Cost reducing pollution by 1 unit A 70 Units $20 B 80 Units $25 C 50 Units $10 Who sells permits and how many do they sell? Who buys permits and how many do they buy? Briefly explain why the sellers and buyers are each willing to do so. What is the total cost of pollution reduction in this situation? How much higher would the cost of pollution reduction be if the permits could not be traded?arrow_forwardWhat are three types of Efficiency?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of MicroeconomicsEconomicsISBN:9781305156050Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Microeconomics
Economics
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:Cengage Learning