The following graph shows the demand (marginal private benefits) and supply (marginal private costs) curves for a good. The dashed drop lines on thegraph reflect the market equilibrium price and quantity for this good.Suppose that a positive externality arises as a result of the production of this good.Adjust the following graph by shifting one of the curves to reflect the presence of the positive externality.PRICE AND COSTThe market fails in that itoverproducesunderproducesSupplyDemandthe good.DemandSupply(?)

Positive externality in production occurs when the production of a good or service generates…

Answered: The following graph shows the demand…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a market with the following supply and demand. (It may help to draw a graph for these questions.) P 5 6 7 8 9 10 11 12 13 14 QS 200 300 400 500 600 700 800 900 1000 1100 QD 800 750 700 650 600 550 500 450 400 350 If there is an external cost of $3, what is the efficient quantity? If there is an external benefit of $3, what is the efficient quantity? For the remaining questions assume that there is a $3 external COST. If the government wants to get the efficient quantity with a per/unit tax, how much should the tax be? Now imagine that they use tradable allowances. If they cap the quantity at 400 what would the value of these allowance be in the market? (Assume the market is perfectly competitive and that "one allowance" lets you…
Use the following supply and demand graph to answer the question below. S₁ S₂ Price J E 0 A B с Quantity D₂ -D₁ S₁ and D₁ represent the current market supply and demand, respectively. S2 and D2 represent the socially optimal supply and demand. The positions of the graphs indicate that there is (are) external Multiple Choice costs from production and consumption of the product. costs from production and external benefits from consumption of the product.
Compared to a good with no externalities, a good with a negative externality appear to have experienced a will at each corresponding price. OIncrease in Supply ODecrease in Supply OIncrease in Demand ODecrease in Demand
The Cemex plant in Davenport produced cement. The production of cement created dust which traveled through the air and landed on the nearby area. Testing at an elementary school and fire department near the plant showed toxic levels of Chromium 6 resulting from the dust. Using the concept of externalities and the graph below, explain what kind of externality this event created and the effects this had on economic efficiency. Be sure to indicate any differences between market price and quantity for cement and the efficient price and quantity.
Explain the difference between positive and negative externalities along with an example.
The following graph shows the demand (marginal private benefits, or MPB) and supply (marginal private costs, or MPC) curves for a good. Suppose that a negative externality arises as a result of the production of the good. In particular, the external costs equals $1 per unit of output. The purple line on the graph represents the marginal social costs (MSC) curve associated with this externality. A corrective tax of On the following graph, use the black point (plus symbol) to plot the socially optimal outcome. Suppose the government imposes a $3-per-unit tax on the production of the good. Use the green line (triangle symbol) to plot the new demand or supply curve as a result of the $3-per-unit tax on the production of the good. Then, use the grey point (star symbol) to plot the price and quantity combination with the tax. PRICE AND COST (Dollars per unit) 10 9 8 $1 per unit would result in socially optimal outcome. 0 0 10 20 30 60 40 QUANTITY (Units) 50 + 70 MSC D (MPB) S (MPC) 80 90 100…
Give an example for a negative or positive externality and explain the inefficiency this negative or positive externality might cause. How should the government deal with this negative or positive externality? (regulation, taxes, subsidies, private remedies, etc.) What would be the most appropriate remedy for your example?
Consider a market with the following supply and demand. (It may help to draw a graph for these questions.) P 5 6 7 8 9 10 11 12 13 14 QS 200 300 400 500 600 700 800 900 1000 1100 QD 800 750 700 650 600 550 500 450 400 350 If there is an external cost of $3, what is the efficient quantity? If there is an external benefit of $3, what is the efficient quantity? For the remaining questions assume that there is a $3 external COST. If the government wants to get the efficient quantity with a per/unit tax, how much should the tax be? Now imagine that they use tradable allowances. If they cap the quantity at 400 what would the value of these allowance be in the market? (Assume the market is perfectly competitive and that "one allowance" lets you…
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The market for seasonal flu shots is depicted in the graph. As more people receive flu shots, fewer people catch the flu and potentially pass it on to others. Therefore, the chance of catching the flu decreases for everyone, even those who do not purchase a flu shot. This is an example of a positive externality. The graph contains the private demand curve (D1) and the supply curve. D1 does not take into consideration the social benefit of people getting flu shots. Graph the social demand curve by placing the end points of D2 at the correct locations. Then, indicate the dead weight loss to society by placing the DWL triangle in the correct location on the graph. The Market for Flu Vaccinations D2 (marginal soeial benefit) DWL supply D1 (marginal private benefit) Quantity of flu shots Price ($)
This graph depicts an externality in a specific market: PMC represents the private marginal cost curve while SMC represents the social marginal cost curve: Price PMC ΠΟ F D A H /SMC Demand Quantity
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