Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 9, Problem 7P
(a)
To determine
The efficient level of plastic bags and equilibrium level of plastic bags using
(b)
To determine
The area of efficiency loss in the diagram.
(c)
To determine
The proof that tax on plastic bags would lead to efficient outcome.
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Students have asked these similar questions
The following are some products that generate negative externalities. What are the negative externalities associated with these products?
a)The construction of condominium buildings that involve pile driving
b) Ocean-based farmed salmon production:
c) Cigarettes use Excessive alcohol consumption
d)Automobile use (especially powered by fossil fuel)
Use the graph attached below as a starting point (either download it or print it out). Add curves, labels, etc. to this graph in order to show the following:
1. Show that this good has a $4/unit negative externality (external cost), such as pollution.
2. Shade the area that represents the Deadweight Loss (lost gains from trade) caused by the external cost.
3. Show a tax or subsidy wedge (whichever you think is appropriate) that will solve the problem of the external cost.
4. Show the socially optimal level of production that the Pigouvian tax or subsidy above will help the market to achieve.
You may use software or pencil and paper to complete this graph. Upload it here when you are done.
In the past, some counties and countries have imposed taxes on sugar, saturated fats, and food made with those ingredients as a way to reduce consumption of those foods. Assume the government imposes a unit tax on all chocolate. Answer the following questions
Is there an externality from consuming chocolate? Explain why or why not.
Use a correctly labeled graph to show what happens in the market for chocolate as a result of the unit tax. On your graph, show the market equilibrium before and after the tax (i.e. show the equilibrium prices and quantities.) Show graphically what happens to consumer surplus and producer surplus after the tax (you may need a separate graph to show this.)
Will consumers be able to shift this tax to sellers? If yes explain why/how. If no explain why not.
Based on your answer to c, who will bear the incidence of this tax? Show this on a graph.
How will consumers respond to the tax on chocolate? How will candy companies respond strategically to the tax on…
Chapter 9 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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- 19. This next question will require you to draw on what you have learned about supply and demand and taxes. A study finds that leaf blowers make too much noise; therefore it is considered a externality, so the government imposes a $10 tax on the sale of every unit to correct for the social cost of the noise pollution. The tax completely internalizes the externality. Before the corrective tax, Leaves are Us Manufacturing regularly sold blowers for $100 and market quantity is 300. Draw the supply and demand curve for leaf blowers. Label the axes, the curves, market price, market quantity, and equilibrium. Which curve represents private or internal costs? represents external and private costs? This is also known as What is the private market price? What is the private market quantity? Which curve costs. After the tax is in place, the consumer price of leaf blowers rises to $105. With this change in price, the number of leaf blowers will (decrease/increase). Why will this happen?arrow_forwardAn 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…arrow_forwardLet the supply and demand for widgets be given by the following schedule. Price: 3, 4, 5, 6, 7, 8, 9, 10, 11 Quantity Supplied: 100, 200, 300, 400, 500, 600, 700, 800, 900 Quantity Demanded: 900, 800, 700, 600, 500, 400, 300, 200, 100 a. What quantity will be produced here? b. What quantity is efficient if there are no external costs or benefits? c. What quantity is efficient if there is an external cost of $6 per unit from pollution caused by the widget factories?arrow_forward
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