Figure 5-1 shows a market with an externality. The current market equilibriumoutput of Q1 is not the economically efficient output. The economically efficientoutput is Q2.Refer to Figure 5-1. Suppose the current market equilibrium output of Q1 is not theeconomically efficient output because of an externality. The economically efficientoutput is Q2. In that case, the diagram showsA) the effect of a positive externality in the production of a good.B)the effect of an external benefit such as a subsidy granted to consumers of agood.C) the effect of an external cost imposed on a producer.D) the effect of a negative externality in the production of a good.Previous PageNext PagePage 5 of 189.tv11F7F106.8 Figure 5-1S2PriceP2DemandQ2 QQuantityFigure 5-1 shows a market with an externality. The current market equilibriumoutput of Q1 is not the economically efficient output. The economically efficientoutput is Q2.DECtv80F3DOOF4F5F6F7FB2$&4.76.* C05

Externality refers to positive or negative effect of production or consumption of good on third party which is not involved in production or consumption of the good The graph has two supply curves. S2 is higher than S1. This shows social marginal cost is greater than private marginal cost. Externality is created by producers as two supply curves are given. If it were an externality created by consumers, we would have two demand curves. Answer - d) the effect of a negative externality in the production of a good

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Figure 5-1 shows a market with an externality. The current market equilibrium output of Q1 is not the economically efficient output. The economically efficient output is Q2. Refer to Figure 5-1. Suppose the current market equilibrium output of Q1 is not the economically efficient output because of an externality. The economically efficient output is Q2. In that case, the diagram shows A) the effect of a positive externality in the production of a good. the effect of an external benefit such as a subsidy granted to consumers of a B) good. C) the effect of an external cost imposed on a producer. D) the effect of a negative externality in the production of a good. Previous Page Next Page

Figure 5-1 shows a market with an externality. The current market equilibrium output of Q1 is not the economically efficient output. The economically efficient output is Q2. Refer to Figure 5-1. Suppose the current market equilibrium output of Q1 is not the economically efficient output because of an externality. The economically efficient output is Q2. In that case, the diagram shows A) the effect of a positive externality in the production of a good. the effect of an external benefit such as a subsidy granted to consumers of a B) good. C) the effect of an external cost imposed on a producer. D) the effect of a negative externality in the production of a good. Previous Page Next Page

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the demand for an industrial product is given by P equals 300 minus 2 Q , and the supply is given by P equals Q . Suppose that the pollution due to the production of this good imposes a per unit cost of c equals 3 on society. What type of externality is this, and what curve represents this externality being accounted for (social cost or social demand curve)? A. This is a positive production externality. The social supply curve would be P equals 3 plus Q. B. This is a negative consumption externality. The social demand curve would be P equals 97 minus Q. C. This is a negative production externality. The social supply curve would be P equals 3 plus Q. D. This is a positive consumption externality. The social demand curve would be P equals 103 minus Q.
Consider the above graph. Is there an externality present in this market? If so, what kind? No, there is no externality. Yes, a negative externality. Yes, a positive externality.
Which of the following policies could help the government achieve the efficient outcome? Check all that apply. Introduce emission taxes Offer a subsidy to consumers equal to the vertical distance between the marginal private benefit curve and the marginal social benefit curve Implement tradable pollution permits Offer a subsidy equal to the price at the efficient outcome Offer a subsidy to producers equal to the vertical distance between the marginal private benefit curve and marginal social benefit curve
Which of the following is NOT part of the Coasian Solution to the problem of externalities? Clearly and fully define property rights. Make individuals pay compensation if they infringe upon the property rights others. Prevent parties from negotiating with one another regarding infringements of property rights caused by externalities. None of the above answers is correct (since each choice is part of the Coasian Solution to the problem of externalities).
The following is a copy of the information from Question 1: Consider Product NE, which has a negative externality associated with its production and use ( i.e., the “Incidental Cost” ( IC) of each unit of Product NE is greater than zero). You are told that : * The “Efficient” Output of Product NE = 9000 units * The Free-Market Equilibrium Output of Product NE = 10,000 units * The Consumer’s Surplus + Producer’s Surplus on Unit Number 6000 ( i.e., on that one unit ALONE) is equal to $ 70 ( i.e., the sum of CS + PS = $ 70) * The Cumulative Surplus on the first 9000 units produced is equal to $ 175,000 ( i.e., the sum of the surplus( to society) on ALL 9000 units adds up to $ 175,000) Is the Cumulative Surplus on the first 10,000 units ( i.e., ALL 10,000 units together) greater than $ 175,000, less than $ 175,000, or exactly equal to $ 175,000 ? a. Greater Than $…
If the government subsidizes vaccination against influenza to internalize the externality, should it impose the subsidy on consumers or producers of flu vaccines? How large should the subsidy be? How much less per flu vaccine would patients (i.e., consumers) pay? How much more would manufacturers (i.e., producers) of flu vaccines receive?
Calculate private market equilibrium and the socially optimal equilibrium for the following negative production externality. (note: demand and supply functions are already in the inverse format) Demand: P = 100 - Q Supply: P=-50 + 2Q Marginal External Cost: MEC = 2Q Private Market Equilibrium = Socially Optimal Equilibrium = (enter your responses rounded to a whole number)
Consider the market illustrated in the figure to the right. Supply curve S₁ represents the private cost of production and demand curve D₁ represents the private benefit from consumption. Suppose consumption of this good creates a positive externality. Show how the externality affects the market. 1.) Use the line drawing tool to draw either a new supply (S₂) or demand (D₂) curve incorporating the positive externality in consumption. Properly label this line. 2.) Use the point drawing tool to indicate the market equilibrium price and quantity. Label this point 'Market equilibrium'. 3.) Use the point drawing tool to indicate the efficient equilibrium price and quantity. Label this point 'Efficient equilibrium'. Carefully follow the instructions above, and only draw the required objects. Price Quantity S₁ D₁ N
I chose option D and got this wrong. I thought that when you had a positive externality The demand curve move to the right. Wouldn’t this mean that the level of output and the price would be greater than the free market ones? can you explain how my answer is wrong? What is correct?
This is an end-of-chapter problem that I'm struggling with! thanks!
Note:The solution should not be hand written.
What is an externality? Provide two examples each of positive and negative externalities.