A college education creates positive externalities. Use theaccompanying graph which represents the hypothetical marketMarket for College Educationfor a college education in the land of Smartypants to answer100Ethe questions that follow. MSB stands for marginal social90benefit, MPB stands for marginal private benefit, and MPC80stands for marginal private cost.SMPC701. Move point E to the efficient equilibrium outcome.602. If the government of Smartypants wanted to subsidizecollege education, how much would it subsidize each50student to achieve the socially optimal level of40education?3020DMSB10DMPB102030405060708090100Number of students (in thousands)Price per year ($1000s)

Externalities refer to the cost or benefit of an economic transaction incurred on a third party who…

Answered: A college education creates positive…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

The graph illustrates the market for pesticide with no government intervention. When the factories produce pesticide, they also create waste, which they dump into a lake on the outskirts of town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing pesticide (that is, the marginal social cost of producing the pesticide is double the marginal private cost.) What quantity of pesticide is produced if no one owns the lake? If no one owns the lake, the quantity of pesticide produced is tonnes a week. The efficient quantity of pesticide is tonnes a week. 480- 400- 320- 240- 160- 80- Price (dollars per tonne) 40 80 120 160 Quantity (tonnes of pesticide per week) S D 200 N
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.
The following question refers to the diagram below, which illustrates the marginal private cost, marginal social cost, and marginal social benefits for a goods whose production results in a negative externality. Which area represents the deadweight loss due to the externality? A j. Bh. C h+j. D There is no deadweight loss. $ g MSC MPC k m MSB Q2 Q1
using an appropriate graph, show the effects of externalities on the private and social optimum prices and quantities. discuss briefly how could social optimum levels be achieved
The graph shows the marginal private benefit from a law degree and the marginal cost of obtaining a law degree. The marginal external benefit is $16,000 per law graduate per year. Suppose the government offers vouchers to those who enroll at a law school. Draw the marginal social benefit curve. Label it MSB. Draw an arrow at the efficient number of students to show the value of the voucher that achieves the efficient number of students. The value of the voucher that achieves the efficient number of students is $ >>> Remember that the quantity given on the y-axis is in thousands of dollars. per student. C 48- 40- 32- 24- 16- 8- Price and cost (thousands of dollars) S=MC D = MB 10 30 40 Students (thousands per year) >>> Draw only the objects specified in the question. 20 50 o
None
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.
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.
#22
The graph illustrates the unregulated market for pesticide. When the factories produce pesticide, they also create waste which they dump into a lake on the outskirts of a small town. The marginal external cost of the dumped waste is equal to the marginal private cost of producing pesticide (that is, the marginal social cost of producing the pesticide is double the marginal private cost). If the pesticide factories own the lake, how much pesticide is produced? If the pesticide factories own the lake, the quantity of pesticide produced is tons a week. 1080- 960- 840- 720- 600- 480- 360- 240- 120- 0+ 0 Price and cost (dollars per ton) 30 S 120 D 60 90 Quantity (tons per week) >>> Draw only the objects specified in the question. Q Q 150

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS