The graph shown displays a market with an externality.Price ($)45423 m3936333027242118152963121 23Which of the following statements is true?45 6700Social CostD = SocialBenefit9 10SA) A tax of $12 per unit would eliminate deadweight loss.(B) The government should use a subsidy to counteract this externality.If the government does not intervene, deadweight loss will be $0.(D) None of the above.***Quantity

Externality:It is an economic problem when people take benefit from the economic goods. It is…

Answered: The graph shown displays a market with…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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19:36 ! 13:41 3.00 KB/S 015 The market below depicts supply, demand and marginal social cost in the widget market. 0.00 0.00 0.70 0.00 050 0.40 020 50 100 125 150 175 2001 To correct for the externality, what should be used? Oa. A subsidy of $0.20 b. A tax of $0.20 Oc. A subsidy of $0.30 Od. A tax of $0.30 =
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1. Consider the following picture showing a market in which there is a positive externality: PMC=S Price 00 6 10 3 2 19 1 O 0 100 200 300 400 500 D=WTP SWTP 1,000 1,100 1,200 Quantity At market equilibrium, quantity is At market equilibrium, price is At the market equilibrium, the positive externality creates 2. Consider the graph in the previous example and answer the following questions. At the socially optimal level of production, consumer surplus is External benefits created by the good are in external benefits.
7. Failing to correct negative externalities will create a deadweight loss. Graph it! 8. Explain how the government can discourage negative externalities. Graph it!
3 Let the market supply (representing the marginal private cost) have the form: P(Q) = 1 + 3Q, and the inverse market demand (representing the marginal social benefit) has the form: P(Q) = 25 - Q. Suppose that the production of Q is characterized by a negative externality. The magnitude of the externality (marginal damage) is $4 per unit of Q. a) Find the equilibrium price, quantity, consumer surplus, and the producer surplus resulting from an unregulated market in Q. b) Compute the net economic benefit to society which results from an unregulated market in Q. Note: you need to account for the total damages resulting from an externality. c) What is the socially efficient quantity of Q? d) At the efficient allocation, what is the net benefit to society?
USE THE GRAPH! There is a negative externality from Lyft rides (TRAFFIC) of $0.60 per mile. If the city still charged a $0.60 tax, what would be the deadweight loss? DWL=
9
9) An externality of $5/unit based on the positive social effects of their consumption exists in this market. 20 15 10 10 15 20 Quantity (units) Draw the new social curve on the graph above and answer: Private | Social Social Consumer's Surplus. Producer's Surplus Optimal P Optimal Q Price ($/unit)
How to set the Pigouvian Taxes to correct the problem with negative externalities? Eliminate the divergence between ... Mark all that applies. Group of answer choices the marginal social cost and marginal private cost at the socially optimal level of consumption. the polluter’s private benefit and social benefit. the average social cost and average private costs. input costs and output prices at the market equilibrium. the marginal social cost and marginal private cost at the market equilibrium.
Exhibit 30-2 Price and Cost 0 a) Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the social benefit of expanding output from Q₁ to Q₂ is the area of b) 0₁ 0₂ Q₁CBQ2. Q₁AEQ2. Q₁ABQ₂. d) ABE. Quantity
Price of a movie ticket $14 11 B) 16 C) 18 D) 19 9 8 6 14 16 Supply D₁ = marginal private benefit D₂= marginal social benefit 18 19 Quantity of movie tickets (hundreds per day) Figure 1 illustrates the market for movie tickets during a pandemic, where the government has decided it needs to restrict the sale of tickets for social distancing purposes. The figure illustrates an externality in consumption from going to a movie theater because the cost of spreading the virus is borne by other people. The demand curve showing marginal private benefit includes the chance of spreading the virus by contracting it while inside a movie theater. Question 1. Refer to Figure 1. The efficient equilibrium quantity of movie tickets is hundred per day. A) 14
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