5. The Role of Government: Quota - Quantity Regulation Smoking imposeshealth risks to others and generates negative demand-side externalities. Thefollowing diagram describes the market for cigarettes.(a) In the diagram, identify the lines that express the Marginal Social Cost,Marginal Private Cost, Marginal Private Benefit, and Marginal Social Benefit;briefly explain. [Price per Pack (P)XPacks ofcigarettes (Q)b. Suppose that the government is to impose a quota on cigarette production tocorrect the externality. Using the diagram, indicate the quota, consumer surplusand producer surplus from the quota regulation.Price per Pack (P)Packs ofcigarettes (Q)(c) Please discuss different impacts of quota regulation and excise tax to correctthe externality of smoking. Be sure to discuss their effects on consumer surplus,producer surplus, and government revenue. Which type of regulation will theproducers prefer, quota or exercise tax? Why?

An externality, in economics, refers to a side effect or consequence of an economic activity that…

5. The Role of Government: Quota - Quantity Regulation Smoking imposes health risks to others and generates negative demand-side externalities. The following diagram describes the market for cigarettes. (a) In the diagram, identify the lines that express the Marginal Social Cost,

5. The Role of Government: Quota - Quantity Regulation Smoking imposes health risks to others and generates negative demand-side externalities. The following diagram describes the market for cigarettes. (a) In the diagram, identify the lines that express the Marginal Social Cost,

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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a. What type of market failure would you categorize street lights that are not working? b. Base on the question above, discuss why the type of market failure occur. c. Suggest two relevant Government policies that would yeild the efficient outcome and explain the process through which the implementation of the policies will lead to optimal out come.
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8. Property rights and market failures Loggers are much In the presence of market failures, public policy can improve economic efficiency. Classify the source of market failure in each case listed. Market Failure A person smoking in a restaurant emits second-hand smoke that harms other restaurant patrons. There is only one car dealership in a small town, giving the dealership the ability to influence the price of cars. likely to supply wood to the market if property rights are enforced. Market Power Externality
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