1. When people wear masks during apandemic it provides an external benefit toothers. Economists would likely argue thatgovernments shouldotherwise the amount of mask wearingproduced by the market would bethe socially optimal level.for masksa/ impose a tax; aboveb/ provide a subsidy; belowc/ impose a tax; belowd/ provide a subsidy; above2. Two businesses, X and Y, each dump 20tonnes of pollution into a creek. In an effortto reduce pollution, the government willnow require businesses to have a pollutionpermit to dump pollutants in the creek.Each business receives 10 pollution permitsand they can use it to pollute or sell it to theother business (but lose the ability topollute). To reduce pollution it costsbusiness X $100 per tonne of pollutanteliminated and it costs business Y $50 pertonne of pollutant eliminated. If thegovernment does NOT allow thebusinesses to trade these permits, the totalcost of reducing pollution will beand if the government ALLOWS business tobuy and sell permits, the total cost ofreducing pollution will bea/ $1,500; $1,000b/ $1,500; $500c/ $1,000; $500d/ $1,000; $1,5000 3. Purchasing a car isconsumption andprivate market will likely supplyinAs a result the----_ ofcars.a rival; excludable; the optimal amountb nonrival; nonexcludable; too manyc nonrival; excludable; too fewd rival; nonexcludable; too many

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Price of a movie ticket $14 11 B) 16 C) 18 D) 19 9 8 6 14 16 Supply D₁ = marginal private benefit D₂= marginal social benefit 18 19 Quantity of movie tickets (hundreds per day) Figure 1 illustrates the market for movie tickets during a pandemic, where the government has decided it needs to restrict the sale of tickets for social distancing purposes. The figure illustrates an externality in consumption from going to a movie theater because the cost of spreading the virus is borne by other people. The demand curve showing marginal private benefit includes the chance of spreading the virus by contracting it while inside a movie theater. Question 1. Refer to Figure 1. The efficient equilibrium quantity of movie tickets is hundred per day. A) 14
The Coase Theorem says that if people negotiate the right perform activities that cause externalities, they can always arrive at efficient solutions to problems caused by externalities. Use an example to explain why the people that are harmed are willing to pay to stop pollution.
A neighborhood homeowners' association charges a fee when residents make loud noise from 9 p.m. until 7 a.m. This is similar to using _____ to reduce externalities from noise. Select one: a. command and control regulations treat everyone the same regardless of circumstances. b. a corrective tax to reduce a negative externality c. cap and trade to increase a positive externality d. a government subsidy to reduce a price floor
Which of the following is an exampleof a negative externality? A. Abeekeeper selling honey at a farmers'market B. A factory emittingpollutants into the air C. A restaurantoffering a discount to senior citizensD. A farmer using organic farmingmethods.
Economists Kenneth Chay and Michael Greenstone found that in the two years following the passage of the Clean Air Act of 1970, the sharp reduction in air pollution also led to a decline in infant deaths. Although this and other studies provide compelling evidence of the link between pollution and infant health, it is not clear that reductions from the much lower levels of ambient pollution today would have the same effect. Which of the following reasons could explain this? A. Today, the level of pollution is much higher. Therefore, it will take a much larger reduction in air pollution to reap benefits similar to those in 1970. B. When levels of pollution are high, the marginal benefit of reducing pollution also is high. It follows therefore that the benefit of reducing air pollution in 1970 would be much higher than the benefit from a proportional reduction in air pollution today when the level of pollution is much lower. C. When levels of pollution are…
When does a subsidy that benefits consumers result in a more efficient allocation of a resource? A when the good being produced or consumed is not scarce B when the good being produced or consumed generates a negative externality when the good being produced or consumed generates a positive externality D when the equilibrium price of the good is one that consumers don't like
in the town of Externalia, vaccination programs create additional benefits to the community, beyond the consumers who actually purchase vaccinations The graph on the right shows the market for vaccinations 11 Using the line drawing tool, show a ine representing the true demand for vaccinations, if the external benefit were taken into account Label your line D 2) Using the point drawing tool show the new equibrium price and quantity Label your point E Carefully follow the instructions above, and only draw the required objects Price (5) Qo Quantity of vaccinations (housands)
Some economists claim that early child care generates an external benefit to society. a. What is the market equilibrium? What is the socially optimal outcome? How do they differ? b. The government is planning to provide a per-unit subsidy for child care to achieve the socially optimal outcome. How large should this subsidy be? c. How much is the total government subsidy each month to reach a socially optimal outcome?
Some economists argue that early child care generates an external benefit to society. Consider the following demand and supply graph for early childhood education. Demand: P= 1800-5Q Supply: P= 1000+5Q MEB= 400 1) What is the out of pocket price that consumers should pay in the socially optimal market? 2) Calculate the value of government expenditures in the socially optimal
The graph shows the marginal private benefit from a law degree and the marginal cost of obtaining a law degree. The marginal external benefit is $16,000 per law graduate per year. Suppose the government offers vouchers to those who enroll at a law school. Draw the marginal social benefit curve. Label it MSB. Draw an arrow at the efficient number of students to show the value of the voucher that achieves the efficient number of students. The value of the voucher that achieves the efficient number of students is $ >>> Remember that the quantity given on the y-axis is in thousands of dollars. per student. C 48- 40- 32- 24- 16- 8- Price and cost (thousands of dollars) S=MC D = MB 10 30 40 Students (thousands per year) >>> Draw only the objects specified in the question. 20 50 o
Air horns impose many external costs on society: the risk of being deafened, the annoyance of being awakened in the middle of the night, and so on. Therefore, the market equilibrium quantity of air horns is not equal to the socially optimal quantity. The following graph shows the demand for air horns (their private value), the supply of air horns (the private cost of producing them), and the social cost of air horns, including both the private cost and external costs. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.
Suppose the hot sauce firm cannot reduce the externality without reducing costs. What is a possible next step the government could take to reduce it? Select all that apply. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. Tax the firm for each bottle of hot sauce produced. a b C d e Create a limit on the maximum number of bottles the firm can make. Subsidizing each bottle of hot sauce made. Not allowing consumers to buy hot sauce. Forcing the firm to install equipment to reduce the amount of pollution generated. Answered Incorrect 1 attempt left Resubmit

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