Question 1 A global-positioning anti-theft device installed by one car owner can produce a positive spillover to other citizens in a community. Discuss the impact on the: (i)  Private benefit curve (ii) Social benefit curve (iii)  Private cost curve (iv) Social cost curve (v) Market equilibrium level of output (vi)  Efficient level of output

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Question 1

A global-positioning anti-theft device installed by one car owner can produce a positive spillover to other citizens in a community. Discuss the impact on the:

(i)  Private benefit curve

(ii) Social benefit curve

(iii)  Private cost curve

(iv) Social cost curve

(v) Market equilibrium level of output

(vi)  Efficient level of output

Question 2

(a)   Identify the type of market failure, explain why it occurs and provide a solution

(i)    An auto repair shop convinces you that you need a $20,000 valve job when all you need is an oil change.                                               

(ii)  Everyone in the neighbourhood would benefit if an empty lot were turned into a park but no entrepreneur will come forward to finance the transformation

(iii) A barking dog in the backyard

(b)   Define the tragedy of the commons in your own words.

(c) Why are fish in the ocean an example of a resource that suffers from the tragedy of the commons but cattle grazing in a farmer’s pasture does not suffer from the tragedy of the commons?   

 

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