Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 11, Problem 2IAPA
To determine
To explain:
The quantity of spraying that can be provided by a private control program and the quantity of spraying that can be considered efficient.
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The table below shows the total benefit for cleaning up the roadside for
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$200
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Each hour of cleaning up the roadside costs the city $100. How many
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This graph represents the tobacco industry.
IPrice
16
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Social Cost
12
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Private Cost
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6
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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
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a. Place point A at the equilibirum outcome. Place point B at the socially efficient outcome.
Market for cigarettes
10
Marginal social cost
В
Marginal private cost (supply)
8
A
7
Demand
4
3
1
30
60
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150
180
210
240
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Chapter 11 Solutions
Foundations of Economics (8th Edition)
Ch. 11 - Prob. 1SPPACh. 11 - Prob. 2SPPACh. 11 - Prob. 3SPPACh. 11 - Prob. 4SPPACh. 11 - Prob. 5SPPACh. 11 - Prob. 6SPPACh. 11 - Prob. 7SPPACh. 11 - Prob. 8SPPACh. 11 - Prob. 9SPPACh. 11 - Prob. 10SPPA
Ch. 11 - Prob. 1IAPACh. 11 - Prob. 2IAPACh. 11 - Prob. 3IAPACh. 11 - Prob. 4IAPACh. 11 - Prob. 5IAPACh. 11 - Prob. 6IAPACh. 11 - Prob. 7IAPACh. 11 - Prob. 8IAPACh. 11 - Prob. 9IAPACh. 11 - Prob. 1MCQCh. 11 - Prob. 2MCQCh. 11 - Prob. 3MCQCh. 11 - Prob. 4MCQCh. 11 - A renewable common resource is used sustainably if...Ch. 11 - Prob. 6MCQCh. 11 - Prob. 7MCQCh. 11 - When ITQs are assigned, the market price of an ITQ...
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- How can high-income countries benefit from covering much of the cost of reducing pollution created by low-income countries?arrow_forwardA city currently emits 15 million gallons (MG) of raw sewage into a lake that is beside the city. Table 12.13 shows the total costs (TC) in thousands of dollars of cleaning up the sewage to different levels, together with the total benefits (TB) of doing so. Benefits include environmental, recreational, health, and industrial benefits. Using the information in Table 12.13 calculate the marginal costs and marginal benefits of reducing sewage emissions for this City. What is the optimal level of sewage for this city? How can you tell?arrow_forwardMacmillan Learning The accompanying schedule depicts the marginal social cost (MSC) and the marginal social benefit (MSB) associated with pollution emissions. Assume the polluters bear none of the social cost of pollution and all of the benefits. Quantity is measured in tons. Social Cost- Benefit Schedule Q MSB MSC What is the socially optimal amount of pollution? 9 tons 7 tons 8 tons 0 tons What is the size of the tax that would move the market to this socially optimal quantity? What is the size of the tax that would move the market to this socially optimal quantity? $135 per ton $105 per ton $120 per ton $150 per ton 4 180 60 09 5 165 75 75 6 150 90 00 7 135 105 8 120 120 9 105 135 10 90 150 = 11 75 165 12 60 00 180 13 45 195 14 30 210 15 15 225 16 0 240arrow_forward
- Refer to the Figure. This graph represents the market for cigarettes. This market Price 34 32 30 28 26 24 Social Cost 22 20 Private Cost 18 16 14 12 10 8 4 2 Demand 200 500 600 Quantity has no externalities. would benefit from a tax. would benefit from a subsidy. has no need for government intervention.arrow_forwardParagraph Styles ILOS: A2, C2 Editing Voice 4. The paper industry has the demand and supply curves shown below: Price of paper Quantity demanded Quantity supplied 80 40 70 50 4 60 60 50 70 a. Suppose that this industry results in extreme externalities. What can be said about its optimal output? b. Draw the supply and demand curves for paper. Does the supply curve reflect the true social costs of producing the product? If not will a supply curve reflecting the true social costs lies above or below the supply curve you have drawn? c. What is the equilibrium price of paper? From the point of view of reflecting the true social costs, is this price the correct one, or too low or too high?arrow_forward1. regulations to limit air pollution (a) identify the market failurearrow_forward
- Price and cost (dollars per ton of steel) 250 200 150 100 50 0 2 MSC S-MC D- MSB 8 10 4 6 Quantity (tons of steel per week) The above figure shows the marginal social benefit, marginal private cost and marginal social cost of producing steel. There is a marginal external cost of $ per ton at the socially efficient market quantity of tons. Just enter the value. Do not include the "$" sign.arrow_forwardSub noint(s) possible Next question The graph shows the marginal social cost and the marginal private cost of producing liquid fertilizer. Cost (dollars per ton) 1000- When the 2,000th ton of liquid fertilizer is produced in a week, what is the marginal external cost? 900- MSC 800- 700- em 600- When the 2,000th ton of liquid fertilizer is produced in a week, the marginal external cost is a ton. 500- A. $800 MC 400- О в. $300 300- As O C. $200 200- O D. $500 100- SS 0- Quantity (thousands of tons per week) O Time Remaining: 00:58:17 Assignments (6) v O O O Oarrow_forwardCan I get help asap please The figure below shows the market for a chemical, of which the production causes certain negative externalities in the form of pollution. Define MCP = marginal private cost, MCS = marginal social cost, D = market demand, P = price, and Q = quantity.(a) If the market is competitive, what is the equilibrium price and quantity?(b) Is this equilibrium outcome socially optimal?(c) In terms of the areas denoted by A, B, and C, what is the deadweight loss to society if the market is competitive?(d) What can the government do to achieve the socially optimal level of pollution?arrow_forward
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