Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 10, Problem 3MCQ
To determine
To choose:
The option that correctly explains the effect of an unregulated paint factory polluting a river.
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Classify the source of market failure in each case listed.
Market Failure
Market Power
Externality
A manufacturing plant dumps chemical waste into a nearby river, poisoning the water supply for a small town downstream.
A single public utilities company is responsible for supplying electricity for an entire state. As a result, the utilities company can set the price of electricity.
What is the term used to describe the situation where resources are allocated in a way that maximizes total surplus? A. Pareto efficiency B. Market equilibrium C. Social welfare D. Deadweight loss
B. Let’s consider the market for flour in a different town. Assume that it is efficient (i.e. that there are not external costs to producing flour, and no external benefits from consuming it).
Price ($/lb)
Quantity Supplied (thousands of lbs per day)
Quantity Demanded (thousands of lbs per day)
1.5
8
14
2
9
13
2.5
10
12
3
11
11
3.5
12
10
4
13
9
What is the price and quantity of flour sold without government intervention. Graph this equilibrium. XXXX
2. Suppose that, alarmed by the inability of many poorer consumers to buy flour, the government institutes a $2/lb price ceiling. How much flour will suppliers wish to sell, and how much will buyers demand? How much flour will actually be sold? Show this outcome on the same graph you drew for question 1. XXXX
3. Describe, in one sentence each, three problems that this policy might create? Please do not simply copy down phrases from the textbook, but instead describe ways that…
Chapter 10 Solutions
Foundations of Economics (8th Edition)
Ch. 10 - Prob. 1SPPACh. 10 - Prob. 2SPPACh. 10 - Prob. 3SPPACh. 10 - Prob. 4SPPACh. 10 - Prob. 5SPPACh. 10 - Prob. 6SPPACh. 10 - Prob. 7SPPACh. 10 - Prob. 8SPPACh. 10 - Prob. 9SPPACh. 10 - Prob. 10SPPA
Ch. 10 - Prob. 1IAPACh. 10 - Prob. 2IAPACh. 10 - Prob. 3IAPACh. 10 - Use the following information to work Problems 3...Ch. 10 - Prob. 5IAPACh. 10 - Prob. 6IAPACh. 10 - Prob. 7IAPACh. 10 - Prob. 8IAPACh. 10 - Prob. 9IAPACh. 10 - Prob. 1MCQCh. 10 - Prob. 2MCQCh. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 6MCQ
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- This summer, the temperature records on each other's feet seem to be beaten. In Sweden, the temperature has recently risen to 43 degrees and birds are falling from the sky over exhausted and dying. Carbon emissions are one of the main challenges facing mankind today. Explain the market failure caused by the emissions. Under competitive conditions, the government can use various control tools to establish efficient quantities, e.g. with a fee. Show the effect of such a solution on a diagram and explain in detail why an economical amount involves some pollution. In a monopoly situation, it is not as simple as establishing efficiency by charging emissions. Explain in words and pictures how the different interplay between the cost factors of a company and pollution costs can cause certain government tariffs on pollution to be cost-effective on the one hand and inefficient on the other.arrow_forwardWhich of the following does not create market failure? A. Oil refining creates air pollution B. Airport creates noise pollution C. Production in a competitive market D. A good that is non-rival and non-excludablearrow_forwardMatch the nonprice determinants of supply and demand. (Click the appropriate box) Determinant Technology Preferences Market Size Input costs Related Goods Supply Demandarrow_forward
- The many identical residents of Whoville love drinking zlurps. Each of the residents has the following willingness to pay for the tasty refreshment. a. The cost of producing Zlurp is $150, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) How many bottles will each do Whovillian consume? What is each person's consumer surplus? b.Producing Zlurp creates pollution. Each bottle has an external cost of $1.Taking this additional cost into account, what is total surplus per person in the allocation you described in part (a)? c. Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by one bottle. What happens to Cindy's welfare (her consumer surplus minus the cost of pollution she experiences)? How does Cindy's decision affect the total surplus in Whoville? d. MayorCrinch imposes a $1tax on Zlurp. What is consumption per person now? Calculate consumer surplus, the external cost, government revenue, and total…arrow_forward$15 $12 $8 28 Select one: a. $7 b. $3 500 700 C. $4 d. $15 Supply Social value Demand The figure above shows a market for Softella medicated tissues. Assume the only use for the tissues is to wipe and clean your hands, which prevents the spread of germs to others. If the government were to subsidize the users of the tissues, what would be the dollar amount of the subsidy? Quantity of boxes of so ftella medicated tissuesarrow_forwardComplete the following table. Also find the quantity that maximizes surplus. Quantity Total Benefit Total Cost Marginal Benefit Marginal Cost 0 2 200 200 1000 600 100 10 1000 125 30 2000 100 2200 5000 10 60 2300 6000arrow_forward
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