PRINCIPLES OF ECONOMICS
14th Edition
ISBN: 2810015433483
Author: OpenStax
Publisher: OpenStax
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Textbook Question
Chapter 12, Problem 43P
A 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?
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Exercise 6
Imagine that you head production of a multinational food processing company. The ongoing uncer-
tainty about costs means that you are unsure of the future cost of one of your inputs, x2. Your firm's
production function is
y = f(x1, x2) = x²x²²
The output price p is 1000, x1 = 27, and wx₁ = 60.
1. Suppose the current input price is Wx2
=
50. Solve for the optimal choice of x2.
2. Now suppose that the probability the input price remains 50 is 0.65 and the probability that
Wx2
60 is 0.35. Solve for the optimal choice of x2. Round down to the nearest integer.
=
3. Finally, suppose the costs do actually rise, i.e., Wx2 = 60. Calculate the difference in profit from
the uncertainty in (2) vs. the certainty in (1).
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Chapter 12 Solutions
PRINCIPLES OF ECONOMICS
Ch. 12 - Identify the following situations as an example of...Ch. 12 - Identify whether the market supply curve will...Ch. 12 - For each of your answers to Exercise 12.2, will...Ch. 12 - Table 12.5 provides the supply and demand...Ch. 12 - Consider two approaches to reducing emissions of...Ch. 12 - Classify the following pollution-control policies...Ch. 12 - An emissions tax on a quantity of emissions from a...Ch. 12 - Four films called Elm, Maple, Oak, and (Shelly,...Ch. 12 - The rows in Table 12.7 show three market-oriented...Ch. 12 - Suppose a city releases 16 million gallons of raw...
Ch. 12 - The state of Colorado requires oil and gas...Ch. 12 - Consider the case of global environmental problems...Ch. 12 - A country called Sherwood is very heavily covered...Ch. 12 - What is an externality?Ch. 12 - Give an example of a positive externality and an...Ch. 12 - What is the difference between private costs and...Ch. 12 - In a market without environmental regulations,...Ch. 12 - What is command-and-control environmental...Ch. 12 - What are the three problems that economists have...Ch. 12 - What is a pollution charge and what incentive does...Ch. 12 - What is a marketable permit and what incentive...Ch. 12 - What are better-defined property rights and what...Ch. 12 - As the extent of environmental protection expands,...Ch. 12 - As the extent of environmental protection expands,...Ch. 12 - What are the economic tradeoffs between low-income...Ch. 12 - What arguments d0 low-income countries make in...Ch. 12 - In the tradeoff between economic output and...Ch. 12 - What does a point inside the production...Ch. 12 - Suppose you want to put a dollar value on the...Ch. 12 - Would environmentalists favor command-and-control...Ch. 12 - Consider two ways of protecting elephants from...Ch. 12 - Will a system of marketable permits work with...Ch. 12 - Is zero pollution possible under a marketable...Ch. 12 - Is zero pollution an optimal goal? Way or why not?Ch. 12 - From an economic perspective, is it sound policy...Ch. 12 - Recycling is a relatively inexpensive solution to...Ch. 12 - Can extreme levels of pollution hurt the economic...Ch. 12 - How can high-income countries benefit from...Ch. 12 - Technological innovations shift the production...Ch. 12 - Show the market for cigarettes in equilibrium,...Ch. 12 - Refer to Table 12.2. The externality created by...Ch. 12 - Table 12.12, shows the supply and demand...Ch. 12 - A city currently emits 15 million gallons (MG) of...Ch. 12 - In the Land of Purity, there is only one form of...
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