A local college is deciding whether to conduct a campus beautification initiative that would involve various projects, such as planting trees and remodeling buildings, to make the campus more aesthetically pleasing. and (excludable, non- For the students of the college, the visual appearance of the campus is (rival, non-rival) excludable)___________ Thus, the visual appearance would be classified as a public good. Suppose the college administrators estimate that the beautification initiative will cost $6,300. To decide whether the initiative should be undertaken, administrators conduct a survey of the college's 470 students, asking each of them their willingness-to-pay for the beautification project. The average willingness-to-pay, as revealed by the survey, is $14. The benefit of the beautification initiative, as suggested by the survey, is (greater, less)___________ than the cost, the college administrators (should, shout not) beautification initiative. Because the estimated benefit is _______undertake the

A local college is deciding whether to conduct a campus beautification initiative that would involve various projects, such as planting trees and remodeling buildings, to make the campus more aesthetically pleasing. and (excludable, non- For the students of the college, the visual appearance of the campus is (rival, non-rival) excludable)_____ Thus, the visual appearance would be classified as a public good. Suppose the college administrators estimate that the beautification initiative will cost $6,300. To decide whether the initiative should be undertaken, administrators conduct a survey of the college's 470 students, asking each of them their willingness-to-pay for the beautification project. The average willingness-to-pay, as revealed by the survey, is $14. The benefit of the beautification initiative, as suggested by the survey, is (greater, less)_ than the cost, the college administrators (should, shout not) beautification initiative. Because the estimated benefit is ___undertake the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5. Productivity declines from environmental regulation a) might occur if firms divert capital from spending on new plant and equipment to comply with regulations. b) have been ruled out by economic studies. c) for well over half of the productivity declines of the 1970s. d) might occur if firms invest in new capital sooner than they otherwise would to comply with regulations. e) have cost large numbers of jobs in manufacturing. 6. Consider the diagram, what is the efficient level of pollution cleanup? Total Benefits of $100 Cleanup $75 $50 Total Costs of $25 Cleanup $0 2. Polution Cleanup (tona)
(Scenario: Avery and Ethan and the Demand for a Public Good) Use Scenario: Avery and Ethan and the Demand for a Public Good. At all levels of provision of the public good: Scenario: Avery and Ethan and the Demand for a Public Good Avery and Ethan are the only members of a community. They have revealed the marginal private benefits they each receive from a public good whose marginal social benefit is known. In addition, the marginal social cost (MSC) of the public good is known and is constant. Marginal benefit of public good P₁ P₂ P3 P₁ Q₁ Q₂ Avery's MB Q3 Ethan's MB MSC MSB Q₁ Quantity transcript O the MSC is less than the MSB. O the optimal level is not attained. O the private marginal benefits cannot be determined. O Avery places a higher value on the public good than Ethan.
For each of the listed goods, indicate whether they are rivalrous or non-rivalrous, excludeable or non-excludeable, if they are public goods, and if they are common property resources. Published product safety information Rivalrous? Non-rivalrous Excludeable? Non-excludeable Public Good? No Common-Property Resource? A seat on an airplane Rivalrous? Excludeable?
6. The Case for Government - Nonexcludable Public Goods Which of the following is a case for government with respect to non-excludable public goods? Check all that apply. The government always produces the exact type of public goods that everyone in the society wants. The government can overcome the free-rider problem associated with non-excludable public goods through taxation. The government always provides non-excludable public goods at the optimal quantity desired by the public.
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…
Suppose the marginal cost (MC) and marginal benefit (MB) of reducing nitrogen oxide air pollution are illustrated in the figure. Suppose initially 3 million tons of nitrogen oxides are being reduced. What is the net benefit to society of increasing the elimination of nitrogen oxide air pollution to 6 million tons? The net benefit is $ million. (Enter your response rounded to one decimal place.) Cost or benefit ($ per ton) 500- 450 400- 350- 300- 250- 200- 150- 100- 50- 0- 0 1 MC 2 3 4 5 6 7 8 Reduction (millions of tons per year) MB 9 10
Lecture: Externality - Pigou8. All-Leather is a tanning company located on Lake Michigan in Chicago. Its total cost functionis C(QA) = 125 + 8QA + 5QA2, where QA is leather production per week in thousands of pounds.a) If leather sells for $408 per thousand pounds, how much leather will All-Leather produce?How much profit does All-leather earn?Enjoy is a beverage company located on Lake Michigan near All-Leather in Chicago. Enjoy’sproduction of beverages is negatively affected by water pollution from All-Leather’s productionof leather. Enjoy’s total cost function to produce beverages isC(QE) = 10QE +3QE2 + 3QA2where QE is Enjoy’s weekly production of beverages, in thousandsof gallons and, as above, QA is All-Leather’s weekly production of leather.b) Is this an example of a pecuniary externality or a real externality? Explain.c) What is the extra cost to Enjoy from an additional thousand tons of leather production by AllLeather (i.e., the external marginal cost of an extra unit of QA…
2, = 160,000 – 2000P and Qs=40,000+2000P, where Q, is the quantity demanded in 100-pound lots, Q, is the quantity supplied in 100-pound lots, and P is the price per 100-pound lot. Currently there is no attempt to regulate the dumping of effluent into streams and rivers by the paper mills. As a result, dumping is widespread. The marginal external cost (MEC) associated with the production of paper is given by the curve MEC=0.0006Qs- a. Calculate the output and price of paper if it is produced under competitive conditions and no attempt is made to monitor or regulate the dumping of effluent. b. Determine the socially efficient price and output of paper. c. Explain why the answers you calculated in parts a and b differ.
Marginal social costs (MSC) will be equal to marginal private costs (MPC) when marginal external costs (MEC) _____ ( equal zero, are greater than zero, equal 100, are infinite) marginal social benefits (MSB) will be equal to marginal private benefits (MPB) when marginal external benefits (MEB)__________ (equal 100, equal zero, equal marginal private benefits (MPB) , are infinite)
Solve D) and last part only in typed answer You are an industry analyst that specializes in an industry where the market inverse demand is P = 100 - 3Q. The external marginal cost of producing the product is MCExternal = 6Q, and the internal cost is MCInternal = 14Q. Instruction: Round your answers to the nearest two decimal places. a. What is the socially efficient level of output? units b. Given these costs and market demand, how much output would a competitive industry produce? units c. Given these costs and market demand, how much output would a monopolist produce? units d. Which of the following are actions the government could take to induce firms in this industry to produce the socially efficient level of output. Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit.…