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

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

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

Below is the hypothetical supply and demand diagram for iron supplements in Brazil with positive externalities. 1. Move Ej to the market's equilibrium. 2. Move E2 to the socially optimal equilibrium. Market for Iron Supplements 5.0 E 1 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 D social D internal 0.5 0.0 100 200 300 400 500 600 700 800 900 1,000 Quantity (thousands) Price ($)
Use the following to answer questions 7-8: Figure: Positive Externalities and Production of Semiconductor Chips Price, marginal | social benefit of chip $55 50 45 40 35 30 25 20 15 10 100 200 300 400 500 600 700 800 900 Quantity of chips 7. (Figure: Positive Externalities and Production of Semiconductor Chips) If the marginal external benefit of producing a chip is $20, then the socially optimal quantity of chips is and the socially optimal price is A) 200; $20 B) 300; $25 C) 500; $35 D) 600; $40 8. (Figure: Positive Externalities and Production of Semiconductor Chips) If the socially optimal production of chips is 500, the government could achieve the socially optimal level of production by granting a Pigouvian subsidy of: A) $5. B) $10. C) $15.
3. The effect of negative externalities on the optimal quantityof consumption Consider the market for pharmaceuticals. Suppose that a pharmaceutical factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing additional pharmaceuticals imposes a constant per-unit external cost of $280. The following graph shows the demand (private value) curve and the supply (private cost) curve for pharmaceuticals. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $280 per unit. PRICE (Dollars per unit of pharmaceuticals) 800 720 640 560 480 400 320 240 160 80 O 1 2 3 □ O O ㅁ 4 Supply (Private Cost) Demand (Private Value) 5 6 7 QUANTITY (Units of pharmaceuticals) Social Cost ? The market equilibrium quantity is units of pharmaceuticals, but the socially optimal quantity of pharmaceuticals production is units. To create an incentive for the firm to produce the socially optimal…
A. Figure 10-8 (above)- For the described positive externality, what is the market quantity without any efforts to correct the market? B. For a positive externality, briefly explain why and how the government may get involved in the market. In your response, provide an example (type of product or service).
When does a subsidy that benefits consumers result in a more efficient allocation of a resource? A when the good being produced or consumed is not scarce B when the good being produced or consumed generates a negative externality when the good being produced or consumed generates a positive externality D when the equilibrium price of the good is one that consumers don't like
Q: The consumption of pies doesn't generate any externalities, but the production of pies generate positive externalities. A. Draw a diagram of a positive externality that occurs in production. Please be sure to label all of your curves and axes, explain the market quantity and the efficient quantity and what area is the dead weight loss. B. Explain, in a sentence or two, why there might be a positive externality associated with the production of Pies.
4. Efficiency in the presence of externalities Cars impose many external costs on society: carbon dioxide emissions that contribute to air pollution, congestion on roadways, and so on. Therefore, the market quantity of cars is not equal to the efficient quantity. The following graph shows the private demand for cars, the private supply of cars, and the social supply of cars, which incorporates both private costs and external costs. Use the black point (plus symbol) to indicate the market quantity. Next, use the purple point (diamond symbol) to indicate the socially optimum quantity. Note: Drop lines will extend to both axes automatically. DERIVATE QUARKET O5OCIAL SSOCIAL SPRVATE QUANTITY OF CARS From society's standpoint, the market is producing cars. This is an example of of resources. PRICE OF CARS
3. The effect of negative externalities on the optimal quantity of consumption Consider the market for electricity. Suppose that a power plant dumps byproducts into a nearby river, creating a negative externality for those living downstream from the plant. Producing additional electricity imposes a constant per-unit external cost of $300. The following graph shows the demand (private value) curve and the supply (private cost) curve for electricity. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $300 per unit. 1000 900 800 700 600 500 400 300 200 PRICE (Dollars per unit of electricity) 100 ப 0 0 1 2 ° 3 0 ° 4 ° QUANTITY (Units of electricity) 5 6 Supply (Private Cost) Demand (Private Value) Social Cost ? The market equilibrium quantity is units of electricity, but the socially optimal quantity of electricity production is units. To create an incentive for the firm to produce the socially optimal quantity of electricity, the government…
3. The effect of negative externalities on the optimal quantityof consumption Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $160. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $160 per unit. ? PRICE (Dollars per unit of electric cars) 800 720 640 560 480 400 320 240 160 80 0 0 O ☐ 1 ☐ O ☐ O ☐ ☐ O 2 3 5 QUANTITY (Units of electric cars) ☐ Supply (Private Cost) O Demand (Private Value) 6 7 Social Cost 1.5 To create an incentive for the firm to produce the socially optimal quantity of electric cars, the government could impose a per unit of electric cars. 2 2.5 3 3.5 4 4.5 5 5.5 The market…
3. Efficiency in the presence of externalities Roses confer many external benefits on society: the beauty they add to a room or garden, the wonderful aroma they give off, and so on. Therefore, the market equilibrium quantity of roses is not equal to the socially optimal quantity. The following graph shows the demand for roses (their private value), the supply of roses (the private cost of producing them), and the social value of roses (the private value and external benefits). 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 anid
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…