3. Epoints) Assume that the city government announces that public parks in the city belong tothe public and from now on the public will be responsible for keeping the parks clean and thegovernment will no longer perform that function. Will the city parks be clean after this change ingovernment policy? Please give an explanation which includes the concept of the free-riderproblem.4. (pres) If I decide to play loud music late at night, how can this impose a negativeexternality on my neighbors? You must not only explain how the impact is negative but also whythe impact is considered an externality. Please give an explanation.

Question 3: Public Responsibility for Parks and the Free-Rider ProblemWhen the city government…

Answered: 3. Epoints) Assume that the city…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6. (External Costs with Variable Technology) Think of an industry that pollutes the water and has access to vari- able technology for reducing that pollution. Graphically illustrate and explain the impact of each of the follow- ing, other things constant, on the optimal level of water quality:a. New evidence is discovered about a greater risk of cancer from water pollution.b. The cost of pollution-control equipment increases.c. A technological improvement reduces the cost of pol- lution control.
3. Dancaster Utilities is a natural monopoly which is in charge of supplying water to the city of Dancaster. Competitive price and quantity are 10 and 5. Monopoly price and quantity are 12 and 3. (a) Illustrate graphically and explain the welfare loss that takes place due to monopoly behaviour. (b) Explain and illustrate graphically which is the desirable regulated price that the local government should impose. (c) Which is the socially efficient level of output? (d) Illustrate graphically the case where the government regulates the price at too low a level. What will occur in the market? And regarding social welfare?
1
3. The effect of negative externalities on the optimal quantity of consumption Consider the market for steel. Suppose that a steel manufacturing plant dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the plant. Producing an additional ton of steel imposes a constant marginal external cost (MEC) of $165 per ton. The following graph shows the demand (marginal private benefits, or MPB) curve and the supply (marginal private costs, or MPC) curve for steel. Use the purple points (diamond symbol) to plot the marginal social costs (MSC) curve when the marginal external cost is $165 per ton. PRICE (Dollars per ton of steel) 1100 990 880 770 660 550 440 330 220 110 0 0 + 1 O ☐ O 2 0 H 3 ▬ The market equilibrium quantity is O 4 5 QUANTITY (Tons of steel) ☐ ☐ 6 Supply (MPC) Demand (MPB) 7 MSC ? tons of steel, but the socially optimal quantity of steel production is To create an incentive for the firm to produce the socially optimal quantity…
(Figure: The Socially Optimal Quantity of Emissions from Coal Production) Use Figure The Socialy Optimal Quarety of Emissions from Coal Production in the figure, firms are the only beneficiaries of polution, and costs are borne solely by others in the society. Without government intervention Marginal social cost, marginal social benefit MSC of pollution MSB of pollution Quantity of pollution emissions (tons) O The outcome cannot be determined without more information Orms will continue to polute until the marginal benefit to them is $200 O firms will continue to pollute until the marginal benate to them is zero. O the quantity of pollution will be optimal.
4. The dollar value of fish caught from Lake Spooky is given by f(b) = 1006 - 56², where b is the number of fishing boats. Fishing boats are costless to buy and operate. What is the optimal tax that the Department of Fish Affairs should impose on fishing boats, so as to avoid the Tragedy of the Commons? (a) $50 per boat (b) $1 per boat (c) $0 per boat (d) $100 per boat
5. Property rights and market failures Loggers are much likely to supply wood to the market if property rights are not enforced. In the presence of market failures, public policy can improve economic efficiency. Classify the source of market failure in each case listed. Market Market Failure Power Externality A manufacturing plant dumps chemical waste into a nearby river, poisoning the water supply for a small town downstream. A single grocery store is the only source of food in a small town, giving the store the ability to influence the price of food.
(Table: City Sanitation in Winnetka) Use Table: City Sanitation in Winnetka. Suppose that the marginal cost of each street cleaning is $6. How many street cleanings will there be? Table: City Sanitation in Winnetka Number of Street Cleanings 10 1 2 3 14 QUESTION 29 5 05 03 2 Edwin's Total Benefit Geraldine's Total Benefit $0 10 18 24 28 30 $0 18 15 21 26 30
8. Stody Questions and Problems #8 California once proposed legislation that would have required 10% of its car fleet to be nearly emissions-free by the year 2003. This mandate spurred electric vehicle research. Such vehicles could be powered by photovoltaic cells or by batteries that are recharged using an electrical outlet. True or False: Electric vehicles that use electrical outlets are not emissions-free because electric production requires coal, nuclear, or hydroelectric plants, none of which are pollution-free. O True False Electric vehicles that are powered by photovoltaic cells pollution. emissions-free because the manufacturing of PVCs
2. Study Questions and Problems #2 Suppose a car sells for $21,000 in a market with no pollution restrictions. When there are pollution restrictions, the car will sell for $21,000.
INTR.27 A city is debating whether or not to build a new park. The city owns the land, having purchased it 50 years ago for $25,000. A local restaurant developer has offered $700,000 for the land. The development costs for the park would be $100,000. What is the minimum amount of the benefits for the park development in order to be rational for the city? a $100,000 b $125,000 c $800,000 d $825,000
1. regulations to limit air pollution (b) provide two problems if the government does not intervene in the situation(market failure)

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