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,

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 3PA

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MSC 10 4 MSB 100 200 300 400 500 600 Quantity (dozens of doughnuts per day) 18) The above figure shows the marginal social benefit and marginal social cost curves of doughnuts in the nation of Kaffenia. There is no external benefit. What is the marginal benefit to the citizen of Kaffenia who consumes the 100th dozen doughnuts each day? [5 POINTS] A) $10.00 per dozen B) $8.00 per dozen C) $6.00 per dozen D) $4.00 per dozen 19) The above figure shows the marginal social benefit and marginal social cost curves of doughnuts in the nation of Kaffenia. What is the marginal social cost to the economy of Kaffenia of producing the 100th dozen doughnuts each day? [4 POINTS] A) $10.00 per dozen B) $8.00 per dozen C) $6.00 per dozen D) $4.00 per dozen Marginal cost and marginal benefit (dollars per dozen)
This graph represents the tobacco industry. IPrice 16 14 Social Cost 12 10 Private Cost 8 6 4 Demand 200 500 650 Quantity a) Without any government intervention, what is the market determined price and quantity? b) What is the price of the externality? c) What is the socially optimal price and quantity? d) What should the government do (impose a tax or provide a subsidy) to internalize this externality? What is the amount of the the corrective tax/subsidy needed to be to move the outcome from the market equilibrium to the socially-optimal outcome?
Paragraph Styles ILOS: A2, C2 Editing Voice 4. The paper industry has the demand and supply curves shown below: Price of paper Quantity demanded Quantity supplied 80 40 70 50 4 60 60 50 70 a. Suppose that this industry results in extreme externalities. What can be said about its optimal output? b. Draw the supply and demand curves for paper. Does the supply curve reflect the true social costs of producing the product? If not will a supply curve reflecting the true social costs lies above or below the supply curve you have drawn? c. What is the equilibrium price of paper? From the point of view of reflecting the true social costs, is this price the correct one, or too low or too high?
Economics 1. Social Benefit and Social Cost For the following statements: (1) identify if there is an externality or not; If yes, (2) classify them as: positive or negative; (3) If the externality happens during the consumption or production of the good; and, finally, (4) draw a graph with the marginal private and social benefit and the marginal private and social cost. (a) Driving a non-electric-car generates carbon dioxide emissions. (b) Getting a good education improves your productivity. (c) Developing open-source software makes new tools available for developers. (d) A Youtuber makes loud noises in the middle of the night while recording videos. (e) A person is blasting music on the subway.
(Figure: Softella) Refer to the figure. The figure shows a market for medicated tissues. Assume that the only use for these tissues is to wipe and clean one's hands, thus preventing germs from spreading to other people. What is the dollar amount of the external benefit (per box) that is created by the use of this product? Supply $16 12 Social value Demand Quantity of boxes of softella medicated 500 700 tissues Select one: a. $16 b. $12 c. $24 d. $8
Oregon legislative committee passes cap-and-trade bill Lawmakers are moving Oregon a step closer to adopting what would be the nation's second economywide carbon pricing scheme. after California. Price and cost (cents per mile) Q 40- S=MC a G Source: Portland Business Journal, May 17, 2019 35 The transportation sector is Oregon's largest contributor to carbon emissions. Under what conditions would Oregon's carbon pricing scheme reduce carbon emissions to the efficient quantity? Use a graph to illustrate your explanation. Show the effects of setting the price of carbon too low and too high. 30- 25 20 15 and permits traded at a The efficient quantity of transportation would be produced if the quantity of permits was set such that, price OA. marginal private cost of transportation equals marginal benefit, above marginal external cost B. marginal social cost of transportation equals marginal benefit, equal to marginal external cost OC. marginal social cost of transportation equals marginal…
Refer to Figure. The graph represents a market in which 24 22 22 Price 18 16 81 Social cost (private cost and external cost) Supply (private cost) Demand (private valne) 120 160 Quantity a. Othere is no externality. b. Othere is a positive externality. c. Othere is a negative externality. d. The answer cannot be determined from inspection of the graph.
Externalities and Public Goods: End of Chapter Problems 7. "Internalizing" a negative externality refers to the incorporation of the full social cost of negative spillovers into the price of a product. a. Internalizing a negative externality leads to a in price and a in output and employment. b. The globalization of production has made implementation of policies that foster internalization of negative externa because it allows companies to shop for more favorable legal environments if cleanup costs are significant. it enables governments to more easily establish rules and regulations on a global scale.
10. A local drama company proposes a new neighborhood theater in San Francisco. Before approving the permit, the city planner completes a study of the theater's impact on the surrounding community. a. One finding of the study is that the theaters attract traffic, which adversely affects the community. The city planner estimates that the cost to the community from the extra traffic is $5 per ticket. What kind of an externality is this? Why? b. Graph the market for theater tickets, labeling the demand curve, the social-value curve, the supply curve, the social-cost curve, the market equilibrium level of output. Also show the per-unit amount of the externality. c. Upon further review, the city planner uncovers a second externality. Rehearsals for the plays tend to run until late at night, with actors, stagehands, and other theater members coming and going at various hours. The planner has found that the increased foot traffic improves the safety of the surrounding streets, an estimated…
1. Externalities - Definition and examples An externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives any compensation for that effect. If the impact on the third party is adverse, it is called a externality. The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. Adjust one or both of the curves to reflect the presence of the externality. If the social cost of producing the good is not equal to the private cost, then you should drag the supply curve to reflect the social costs of producing the good; similarly, if the social value of producing the good is not equal to the private value, then you should drag the demand curve to reflect the social value of consuming the good. ? PRICE (Dollars per unit) QUANTITY (Units) Supply Demand Demand Supply With this type of…
4. Understanding different policy options to correct for negative externalities Carbon dioxide emissions have been linked to degradation of air quality. The following table lists some potential regulations targeting the amount of airborne carbon dioxide. For each policy listed, identify whether it is a command-and-control policy (regulation), tradable permit system, corrective subsidy, or corrective tax Tradable Permit System: Public Policy The government charges factories $210 for every ton of carbon dioxide they emit. The government orders every factory to adopt a new technology, which reduces carbon dioxide emissions into the atmosphere.. The government limits total carbon-dioxide emissions by all factories to 280,000 tons per five years. Each individual factory is given the right to emit 240 tons of carbon dioxide, and factories may buy and sell these rights in a marketplace. The government agrees to reimburse all factories that purchase new, emissions-reducing technology in order…
Economics Which of the following statements is TRUE? I. In the face of a negative externality, a monopolistic market produces less than the socially optimal quantity of output. II. If public transport creates an external marginal benefit, the marginal social benefit of public transport services will always exceed their private marginal benefit. III. In unregulated markets, positive externalities create deadweight losses, but negative externalities do not. IV. In the face of a positive externality, a perfectly competitive market produces more than the socially optimal quantity of output. II and IV are correct II only is correct I and III are correct I and IV are correct Ensure that you provide an appropriate rationale for the answer provided included marking use of appropriate diagrams where possible.