A3) Consider production involving a positive extemality. Which one of the followingstatements is true?a) Without government intervention the market will produce excess supply.b) Marginal social cost is higher than marginal private cost.e) Marginal social benefit is less than marginal private benefit.d) A subsidy to producers could increase production to the socially optimum level.e) A Pigouvian tax could be imposed on the producer to achieve the socially optimumlevel of production.

An externality is said to occur when the consumption or production of a product incurs a cost or…

A3) Consider production involving a positive extemality. Which one of the following statements is true? a) Without govermment intervention the market will produce excess supply. b) Marginal social cost is higher than marginal private cost. c) Marginal social benefit is less than marginal private benefit. d) A subsidy to producers could increase production to the socially optimum level. e) A Pigouvian tax could be imposed on the producer to achieve the socially optimum level of production.

A3) Consider production involving a positive extemality. Which one of the following statements is true? a) Without govermment intervention the market will produce excess supply. b) Marginal social cost is higher than marginal private cost. c) Marginal social benefit is less than marginal private benefit. d) A subsidy to producers could increase production to the socially optimum level. e) A Pigouvian tax could be imposed on the producer to achieve the socially optimum level of production.

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

Suppose Firm A is the anly producer in some market. You are given information about the market demand and marginal cost for Firm As product Firm A's market demand is given by: Q= 60 - P Firm A's marginal cost is given by: MC = 6+Q A) Calculate the profit-maximizing output for Firm A. B) Calculate the profit-maximizing price for Firm A. Calculate what would have been the socially efficient output level produced in this market.
Suppose that the logging industry in Canada is unregulated, and anyone can cut-down a tree on public land and sell it. We would expect to see trees cut-down since the marginal social cost of cutting down trees the price of trees. Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. too many; equals b too many; is below c the optimal amount of; equals too many; is above
Which of the following statements is correct? a.) Economic analyses can often do a reasonable job of evaluating the net benefits from some re-allocation of environmental resources. Policymakers should thus feel comfortable in choosing among alternative policies according to whichever one yields the highest net benefits. b.)Basic benefit-cost analysis, as typically practiced in the U.S., assumes that the marginal value of an extra dollar of net benefits is the same for everyone. c.)All socially optimal allocations are efficient, but the reverse is not true. d.)There is always a tradeoff between efficiency and equity. A reallocation of environmental resources that improves efficiency cannot also improve equity, and vice versa.
Consider placing a tax on a good that has a positive benefit externality of MEB=3 where MSC=2Q and MPB = 21-Q. a. Compare the equilibrium outputs with (i) no tax, (ii) with a Tax of $3, and (iii) at the social optimu. b. In this case, what happens to DWL when a tax is added? Show and explain your reasoning.
Microeconomics market failure
What exactly is a Pigovian tax? Give some instances of how the Pigovian tax can be used to tackle environmental issues.
The market for plasticans is perfectly competitive. Market Supply is givenby Q=7P and Market Demand is given by Q=455-2P. Each extra unit ofplastican produced imposes a negative externality of $8. Implement theoptimal Pigouvian tax/subsidy that implements the efficient outcome.
Which of the following statements is true? a. Competitive markets result in the socially efficient price and quantity when externalitites exist. b. Command-and-control regulations set an environmental goal and dictate how the goal will be achieved. c. . Economists prefer command-and-control regulations to incentive-based pollution programs. d. An effluent tax is a tax imposed on rich people.
Explain why private solutions lead to suboptimal provision of public goods. Enumerate the ways that private solutions do not lead to pareto optimal result. Do you think there is a way to provide public goods efficiently?
Most countries today have subsidised the provision of education. Consider an imaginary country, Gondolin. Gondolin pays a subsidy of $10 000 per year to each student enrolled in tertiary education.(a) Depict, with the help of a figure, the initial market for tertiary education in Gondolin, assume that: 1) education was left to the competitive free market; 2) the marginal private benefit is equal to the marginal social benefit; 3) the marginal private cost is equal to the marginal social cost. Now describe, using the help of the figure, the effect of the government subsidy on the price and quantity traded of tertiary education, where the X axis of the figure should be the quantity of students enrolled in tertiary education. You do not need to use actual numbers – focus on the direction of change in price and quantity traded caused by the subsidy.(b) Identify the area of the figure you drew in (a) that depicts the total size of the subsidy paid by the government to the students enrolled…
1. An externality exists when agent A’s utility or production function depends on real variables chosen by another agent B, without an offer of compensation or other attention given to the effect of A’s well-being. True or False 2. The "invisible hand" of the market leads to the efficient allocation of goods and services, even in the presence of externalities. True or False 3. If there is a negative production externality, the market price of the good will be higher than the socially-optimal price. True or False
4. Suppose the supply curve of portable radio rentals in Golden Gate Park is given by P= 5+ 0.1Q and the demand curve is by P = 20 -0.2Q. a. If each portable radio imposes $3 per day in noise costs on others, by how much will the market equilibrium quantity exceed the socially optimal number of rentals? b. How would the imposition of a $3 per unit tax affect the efficiency in this market?