Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 10, Problem 7PA
Sub part (a):
To determine
Externality.
Sub part (b):
To determine
Externality.
Sub part (c):
To determine
Externality.
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Suppose that you put an invisible tracking device on your computer that will instantly lead police to it if your computer is ever stolen. Does your purchase of the tracking device provide a positive or negative externality? What kind of externality do you provide when you purchase a visible computer lock in order to prevent theft?
Which of the following generate the type of externality previously described? Check all that apply. The city where you live has granted a permit to put a movie theater in your neighborhood, causing traffic jams at night and on weekends. A microbiology lab has published its breakthrough in swine flu research. Your roommate, Lucia, has bought a puppy that barks all day while you are trying to study economics. Eric has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season.
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Chapter 10 Solutions
Principles of Microeconomics
Ch. 10.1 - Prob. 1QQCh. 10.2 - Prob. 2QQCh. 10.3 - Prob. 3QQCh. 10 - Prob. 1CQQCh. 10 - Prob. 2CQQCh. 10 - Prob. 3CQQCh. 10 - Prob. 4CQQCh. 10 - Prob. 5CQQCh. 10 - Prob. 6CQQCh. 10 - Prob. 1QR
Ch. 10 - Prob. 2QRCh. 10 - Prob. 3QRCh. 10 - Prob. 4QRCh. 10 - Prob. 5QRCh. 10 - Prob. 6QRCh. 10 - Prob. 1PACh. 10 - Prob. 2PACh. 10 - Prob. 3PACh. 10 - Greater consumption of alcohol leads to more motor...Ch. 10 - Prob. 5PACh. 10 - The many identical residents of Whoville love...Ch. 10 - Prob. 7PACh. 10 - Prob. 8PACh. 10 - Prob. 9PACh. 10 - Prob. 10PA
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- 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?arrow_forwardDefine externalities. Also give an example of a negative externalityarrow_forwardGive an ideal example of a positive (consumption) externality which leads to a market failurearrow_forward
- Suppose that speeding imposes externalities on other people resulting in a social cost of $50. A town is considering hiring an extra police officer to give out speeding tickets. If we want to maximize social welfare (absent enforcement costs), which of the following statements are true? (Assume risk neutral drivers.) What happens to the socially optimal cost of the speeding ticket if the town decides to hire the police officer? a) It goes down b) It goes up c) The amount that it goes down depends on salary of the police officer d) The amount if goes up depends on the salary of the police officer e) None of the abovearrow_forwardWhat is the principal question Coase posits when it comes to negative externalities? Who should be allowed to inflict harm on whom? Who is morally correct in any given argument about harm? How large is the harm caused?arrow_forwardCause and Individual Example of Market Failure with a Negative Externality In Section 1, externalities are introduced as well as market failures, where the socially optimal output is not the same as what the market produces by itself. For this discussion, your task is to: Describe a real-world negative externality. In your externality identify who are the participants in the market and who receives the spillover How are the incentives for the firm misaligned from the rest of society to make the externality?arrow_forward
- To produce honey, beekeepers place hives of bees in the fields of farmers. As bees gather nectar, they pollinate the crops in the fields, increasing the yields of these fields at no additional cost to the farmer. a) Is this an externality in consumption or production? b) Is this a negative or positive externality? c) If this externality is not internalized, would beekeepers produce more or less bees than socially optimal? Why? d) Suggest a market-based solution that would internalize the externality. In your answer, give reference to the social cost and social value curves. e) What might be a reasonable private solution to this externality and how might the solution be reached?arrow_forwardWhat does Coase mean by "the reciprocal nature" of the problem of negative externalities? the avoidance of harm done by one party causes harm to that party all people hurt all other people people take turns hurting each otherarrow_forwardDescribe the misallocation of resources when there is a negative externality. Describe (NOT LIST) some ways society (government) might use to correct the misallocation. Are we sure the resulting allocation will be correct?arrow_forward
- What are two ways to protect your car from theft. The Club (a steering wheel lock) makes it difficult for a car thief to take your car. Lojack (a tracking system) makes it easier for the police to catch the car thief who has stolen it. Which of these types of protection conveys a negative externality on other car owners? Which conveys a positive externality? Do you think there are any policy implications of your analysis?arrow_forwardAssume a market for fertilizers, and let D denote the demand of fertilizers while S their supply. The inverse demand is p = 10 - q, and the supply is MC = q. The marginal damage created by runoff water being exposed to fertilizers is MEC = q/2 The use of fertilizers is creating an externality and the government wishes to intervene in the market. Use a figure to depict the competitive outcome. Derive the competitive equilibrium outcome. Use a second figure to explain the negative externality attributed to the use of fertilizers. The use of fertilizers improves yield, but it also damages the underground aquifer. What is the Pigovian Tax? Use a figure to explain. Can it be used to correct for the externality? Derive the Pigovian tax and characterize the social optimum solution. Can a standard achieve the social optimum? What about a quota? Explain using a figure. Explain and show step-by-step!arrow_forwardAssume a market for fertilizers, and let D denote the demand of fertilizers while S their supply. The inverse demand is p = 10 - q, and the supply is MC = q. The marginal damage created by runoff water being exposed to fertilizers is MEC = q/2 The use of fertilizers is creating an externality and the government wishes to intervene in the market. Use a figure to depict the competitive outcome. Derive the competitive equilibrium outcome. Use a second figure to explain the negative externality attributed to the use of fertilizers. The use of fertilizers improves yield, but it also damages the underground aquifer. What is the Pigovian Tax? Use a figure to explain. Can it be used to correct for the externality? Derive the Pigovian tax and characterize the social optimum solution. Can a standard achieve the social optimum? What about a quota? Explain using a figure. Explain and show step-by-step for last two questions please!arrow_forward
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