Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 10, Problem 9SPPA
To determine
The externality mentioned in the news clip and its explanation.
The ways in which road tolls and high parking levies can reduce the congestion on the roads of Philadelphia and their explanation.
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Students have asked these similar questions
1) People who live on the edge of small lakes sometimes have break walls constructed on their property by the shore. A break wall is typically a vertical column of wood or concrete that prevents high water levels from covering part of the owner's property, reducing the size of the beach, and/or eroding the yard. However, several communities have restricted property owners from building break walls. What is one reason for that? Hint: Think about potential externalities of building a break wall.
(Short answer)
2)When are quantity restrictions not the same as price restrictions (via taxes)? Describe one situation in which the government would be better off imposing quantity restrictions than setting a tax and explain why quantity restrictions are better in that case.
(Short answer)
10. A local drama company proposes a new neighborhood theater in San Francisco.
Before approving the permit, the city planner completes a study of the theater's impact on
the surrounding community.
a. One finding of the study is that the theaters attract traffic, which adversely affects the
community. The city planner estimates that the cost to the community from the extra
traffic is $5 per ticket. What kind of an externality is this? Why?
b. Graph the market for theater tickets, labeling the demand curve, the social-value curve,
the supply curve, the social-cost curve, the market equilibrium level of output. Also show
the per-unit amount of the externality.
c. Upon further review, the city planner uncovers a second externality. Rehearsals for the
plays tend to run until late at night, with actors, stagehands, and other theater members
coming and going at various hours. The planner has found that the increased foot traffic
improves the safety of the surrounding streets, an estimated…
Problem 1: Please complete the graph using parts A, B, and C
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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- (Negative Externalities) Suppose you wish to reduce a negative externality by imposing a tax on the activity that creates that externality. When the amount of the externality produced per unit of output increases as output increases, the correct tax can be determined by using a demand-supply diagram; show this. Assume that the marginal private cost curve slopes upward. Negative Externalities: The Market for Electricity in the Midwest:arrow_forwardTable 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?arrow_forwardRefer to Table 12.2. The externality created by the refrigerator production was 100. However, once we accounted for both the private and additional external costs, the market price increased by only 50. If the external costs were 100 why did the price only increase by 50 when we accounted for all costs?arrow_forward
- 3. The effect of negative externalities on the optimal quantity of consumption Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $600. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $600 per unit. PRICE (Dollars per unit of electric cars) 2000 1800 1600 1400 1200 1000 800 600 400 200 0 0 + 1 O □ ☐ O 2 3 4 5 QUANTITY (Units of electric cars) The market equilibrium quantity is ☐ Supply (Private Cost) 6 Demand (Private Value) 7 Social Cost (?) units of electric cars, but the socially optimal quantity of electric car production is To create an incentive for the firm to produce the socially optimal…arrow_forward3. The effect of negative externalities on the optimal quantity of consumption Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $210. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $210 per unitarrow_forwardDescribe 5 five negative externalities arising from the consumption and disposal of plastic bottlesarrow_forward
- Mankiw Chapter 11 question 2 Are the externalities associated with public goods generally positive or negative? Use examples in your answer. Is the free market quantitiy of public goods generally greater or less than efficient quantity?arrow_forwardThis graph represents the tobacco industry. IPrice 16 14 Social Cost 12 10 Private Cost 8 6 4 Demand 200 500 650 Quantity a) Without any government intervention, what is the market determined price and quantity? b) What is the price of the externality? c) What is the socially optimal price and quantity? d) What should the government do (impose a tax or provide a subsidy) to internalize this externality? What is the amount of the the corrective tax/subsidy needed to be to move the outcome from the market equilibrium to the socially-optimal outcome?arrow_forward3. The effect of negative externalities on the optimal quantityof consumption Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $160. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $160 per unit. ? PRICE (Dollars per unit of electric cars) 800 720 640 560 480 400 320 240 160 80 0 0 O ☐ 1 ☐ O ☐ O ☐ ☐ O 2 3 5 QUANTITY (Units of electric cars) ☐ Supply (Private Cost) O Demand (Private Value) 6 7 Social Cost 1.5 To create an incentive for the firm to produce the socially optimal quantity of electric cars, the government could impose a per unit of electric cars. 2 2.5 3 3.5 4 4.5 5 5.5 The market…arrow_forward
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