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- Based on the graph:a. In this market, how much is the external cost from the production of each unit of tobacco? To reach the social optimum, should the government provide a subsidy or impose a tax? If so, how much tax or subsidy? b. Is there a deadweight loss in this market? If so, why is there a deadweight loss?4. Suppose the supply curve of portable radio rentals in Golden Gate Park is given by P= 5+ 0.1Q and the demand curve is by P = 20 -0.2Q. a. If each portable radio imposes $3 per day in noise costs on others, by how much will the market equilibrium quantity exceed the socially optimal number of rentals? b. How would the imposition of a $3 per unit tax affect the efficiency in this market?3. If certain apple growers are using a cancer-causing pesticide on apple trees, explain how the harm caused by the pesticide can be internalized? How will the market equilibrium change?
- Please solve the second image. First option is "to contribute" or "to not contribute" Second option is "to contribute" or "to not contribute" Third option is "the creation of a positive externality" or "why markets are efficient" or "the free-rider problem" or "the Tragedy of the Commons".7) Issa is regularly outside of her house and tending her flowers and gardening. Her flowers are so vibrant and colorful that everyone in the neighborhood enjoys looking at them and the property prices of all the houses in the neighborhood have increased. The marginal social benefit (MSB), marginal private benefit (MPB) and marginal cost (MC) curves of her gardening activities are drawn below.2. The PMB associated with a product's consumption is PMB-SMB = 360 - 4Q and the PMC = 6Q. The marginal external damage associated with this good's production is MD=2Q. To correct the externality, the government decides to impose a tax of $T per unit sold. | a) What is the level of production without pollution? b) What is the socially optimal level of production? c) What tax should the government set to achieve the social optimum? d) Explain the difference in the two values in (a) and (b)?
- 5.. "Since a public good is enjoyed by all members of society, willingness to pay for the good will not diminish as the amount produced increases." Evaluate and use an example to support your answer. This statement is (correct incorrect). Public goods face (increasing, constant, diminishing ) returns like any other good. Consider the number of highways in a town, for example. Citizens of a town are very willing to pay for the first highway, as it produces large gains to the town. Successive highways produce (more and more, less and less ) willingness to pay because the citizens face lower and lower gains from the increased number of highways. In a town of, say 20,000, 15 highways (would, would not) produce much more benefit than just 2 or 3 highways because of ( increasing, constant, diminishing ) returns.4. Give an example of a negative externality and an example of a positive externality..?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.
- 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 external cost of $140 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for steel. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $140 per ton. Sac Cont O Say Cet Demand P v QUANTITY (araf ste The market equilibrium quantity is tons of steel, but the socially optimal quantity of steel production is_ tons. To create an incentive for the firm to produce the socially optimal quantity of steel, the government could impose a ▼ of5 per ton of steel. d al anidA country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwood’s forest and grow corn, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table shows possible combinations of economic output and environmental protection. a. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, on the vertical axis. b. Which choices display productive efficiency? How can you tell? c. Which choices show allocative efficiency? How can you tell? d. In the choice between T and R, decide which one is better. Why? e. In the choice between T and S, can you say which one is better, and why? f. If you had to guess, which choice would you think is more likely to represent a command-and-control environmental policy and which choice is more likely to…Consider the market for fire extinguishers.a. Why might fire extinguishers exhibit positive externalities?b. Draw a graph of the market for fire extinguishers, labeling the demand curve, the social-value curve, the supply curve, and the social-cost curve.c. Indicate the market equilibrium level of output and the efficient level of output. Give an intuitive explanation for why these quantities differ.d. If the external benefit is $10 per extinguisher, describe a government policy that would yield the efficient outcome.
