3.) Consider the market for beehives. Suppose that the demand for beehives of local apiarists is given by pD = 43 – 4QD and the supply curve of beehives is given by PS = 3Q$ + 8. Suppose that bees from the apiarists' beehives sometimes sting bystanders, which the bystanders find painful and unpleasant. These stings thus represent a negative externality. The cost of the stings from the bees of any given beehive is equal to $7.00. a.) Compute total surplus in this market if there is no intervention from the local government. b.) Compute total surplus in this market if the local government imposes the Pigouvian tax to correct the externality. c.) What is the dead weight loss of the government not taxing in this market?

3.) Consider the market for beehives. Suppose that the demand for beehives of local apiarists is given by pD = 43 – 4QD and the supply curve of beehives is given by PS = 3Q$ + 8. Suppose that bees from the apiarists' beehives sometimes sting bystanders, which the bystanders find painful and unpleasant. These stings thus represent a negative externality. The cost of the stings from the bees of any given beehive is equal to $7.00. a.) Compute total surplus in this market if there is no intervention from the local government. b.) Compute total surplus in this market if the local government imposes the Pigouvian tax to correct the externality. c.) What is the dead weight loss of the government not taxing in this market?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 40P: Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in...

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Concept explainers

Market Failure Analysis

To understand Market failure, we need to first understand welfare economics. An Italian economist, Vilfredo Pareto stated that allocation of resources in an efficient manner such that an economic change, which harms no one and makes someone better off, indicates an increase in social welfare. It is also called Pareto Optimality, where resources cannot further be reallocated without harming one. This does not apply to those economic changes, which harm some and benefit others. social welfare increases if the utility of any of its members' increases and none decrease in the economy.

Question

3.)
Consider the market for beehives. Suppose that the demand for beehives of local
apiarists is given by PD = 43 – 4QD and the supply curve of beehives is given by PS = 3QS +
8. Suppose that bees from the apiarists' beehives sometimes sting bystanders, which the
bystanders find painful and unpleasant. These stings thus represent a negative externality. The
cost of the stings from the bees of any given beehive is equal to $7.00.
-
a.) Compute total surplus in this market if there is no intervention from the local government.
b.) Compute total surplus in this market if the local government imposes the Pigouvian tax to
correct the externality.
c.) What is the dead weight loss of the government not taxing in this market?

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