Climate change and externalities. a. How is the issue of climate change related to the concept of externalities? What is the externality? What are the relevant markets? b. Provide an example of a market that features this externality. Assuming there is no intervention to correct for the externality, compare the market allocation to the efficient allocation. Does the market produce too much? Too little? Is the market outcome efficient? c. What is the relationship between the marginal private cost of production in this market and the marginal social cost? Explain.

Climate change and externalities. a. How is the issue of climate change related to the concept of externalities? What is the externality? What are the relevant markets? b. Provide an example of a market that features this externality. Assuming there is no intervention to correct for the externality, compare the market allocation to the efficient allocation. Does the market produce too much? Too little? Is the market outcome efficient? c. What is the relationship between the marginal private cost of production in this market and the marginal social cost? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The graph shows the unregulated market for electricity. Suppose that at every quantity produced, the marginal external cost of electricity equals the marginal private cost of production. To show the market outcome, draw the following four items on the graph: 1. Draw a point to show the marginal social cost when the utility produces 500 kilowatts per day. Label it 1. 2. Draw the marginal social cost curve. Label it MSC . 3. Draw a point to show the electricity produced and its marginal social cost. Label it 2. 4. Draw a shape to show the deadweight loss created. Label it DWL . >>> Draw only the objects specified in the question.
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 residents of Orléans, Ontario enjoy seeing fireworks over Petrie Island on Canada Day. Each of the community's 1000 residents places a $5 value on the experience. a. What are the defining characteristics of a public good? b. If the cost of putting on a fireworks display is $1000. Would it be socially optimal to have a Canada Day fireworks display in Orléans? c. Would the private market result in a fireworks display? d. Could governments provide a solution to achieving the efficient level of production?
Graphically, the effects of an external benefit can be shown as A. a leftward shift of the market demand curve. B. a leftward shift of the market supply curve. C. a downward movement along the market demand curve. D. a rightward shift of the market demand curve.
a. Which of the following situations exhibits a positive externality? __ Alan purchases a new watch as a gift for his father. __ Sean spends the afternoon cleaning his garage. __ Richard renovates a dilapidated historic home in the center of town. b. when there is a positive externality associated with the market __ too little is produced. __ too much is produced. __ the socially optimal amount is produced. c. Governments may stimulate the economy to move toward the socially optimal output by __ taxing the product __ subsidizing the product. __ implementing a price ceiling.
38. Negative externalities are also called a. positive externalities. b. external benefits. c. external costs. d. all of the above. e.. none of the above. 39 Which of the following is a way governments have tried to deal with negative externalities? a. Governments can impose pollution taxes or green taxes. b. Governments can require specific pollution reduction technologies be used. c. Governments can use a cap and trade system with marketable emissions rights. d. all of the above. e. none of the above.
Q81 A flu vaccine has an associated _____ externality. In the absence of government intervention, the quantity of flu vaccines purchased will be _____ the socially optimal quantity. a. Negative; the same as. b. Negative; less than. c. Positive; less than. d. Positive; the same as. e. Positive; more than.
What is an externality? What are the possible remedies (private or government) to externalities?
If production of a good is known to create external benefits a. Those benefits are larger than those received by the consumers of that good b. Those benefits are smaller than those received by the consumers of that good c. Those benefits are the same as those received by the consumers of that good
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.
38. Negative externalities are also called a. positive externalities. b. external benefits. c. external costs. d. all of the above. e.. none of the above. 39 Which of the following is a way governments have tried to deal with negative externalities? a. Governments can impose pollution taxes or green taxes. b. Governments can require specific pollution reduction technologies be used. c. Governments can use a cap and trade system with marketable emissions rights. d. all of the above. e. none of the above.
Determine whether the actions below correct positive, negative externalities or neither: A. Correct neither B. Correct negative externalities C. Correct positive externalities 1. encourage activity in the market 2. Government investment in infrastructure 3. regulate the production and the externalities in the market