Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 16, Problem 1.4P
A paper factory dumps polluting chemicals into the Snake River. Thousands of citizens live along the river, and they bring suit, claiming damages. You are asked by the judge to testify at the trial as an impartial expert. The court is considering four possible solutions, and you are asked to comment on the potential efficiency and equity of each. Your testimony should be brief.
- a. Deny the merits of the case and affirm the polluter’s right to dump. The parties will achieve the optimal solution without government.
- b. Find in favor of the plaintiff. The polluters will be held liable for damages and must fully compensate citizens for all past and future damages imposed.
- c. Order an immediate end to the dumping, with no damages awarded.
- d. Refer the matter to the Environmental Protection Agency, which will impose a tax on the factory equal to the marginal damage costs. Proceeds will not be paid to the damaged parties.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The market for Q has inverse demand p = 500 - 5Q with private marginal cost is MC, 50 +5Q. Producing of Q emits pollution that creates external marginal damage equal to MCE = 5Q.
A. Find the competitive market price and quantity.
B. Find the efficient (optimal) price and quantity.
C. Explain why the optimal amount of pollution is not zero.
D. Find the welfare cost.
E. Find the per unit tax on Q that would achieve the efficient output.
F. Suppose the market was controlled by a monopoly producer of Q (instead of competitive firms). Would social welfare greater under monopoly or under competition? Explain.
What are externalities; and how the government can fix it.
Explain in detail.
You are an industry analyst that specializes in an industry where the market inverse demand is P = 300 - 4Q. The external marginal cost of producing the product is MCExternal = 8Q, and the internal cost is MCInternal = 15Q.Instructions: Enter your responses rounded to the nearest two decimal places.a. What is the socially efficient level of output? unitsb. Given these costs and market demand, how much output would a competitive industry produce? unitsc. Given these costs and market demand, how much output would a monopolist produce? unitsd. Which of the following are actions the government could take to induce firms in this industry to produce the socially efficient level of output.Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.check all that apply
Pollution taxes
Nonrival consumption
Pollution permits
Chapter 16 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Economists sometimes shock noneconomists by stating that they do not favor the complete elimination of pollution. Explain the rationale for this position.arrow_forwardWhat externality problem do you expect in the market for plastic bags? How does the government correct the inefficiency of the market? Explain in detail with diagramarrow_forwardJustify the statement. True/False Externalily affect a third person which doesn't have any relation with the cause of it.arrow_forward
- You are an industry analyst that specializes in an industry where the market inverse demand is P = 200 - 5Q. The external marginal cost of producing the product is MCExternal = 10Q, and the internal cost is MCInternal = 16Q.Instructions: Enter your responses rounded to the nearest two decimal places.a. What is the socially efficient level of output? unitsb. Given these costs and market demand, how much output would a competitive industry produce? unitsc. Given these costs and market demand, how much output would a monopolist produce? unitsd. Which of the following are actions the government could take to induce firms in this industry to produce the socially efficient level of output.Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box. Pollution taxesunanswered Pollution permitsunanswered Nonrival consumptionunansweredarrow_forwardYou are an industry analyst that specializes in an industry where the market inverse demand is P = 100 - 2Q. The external marginal cost of producing the product is MCExternal = 8Q, and the internal cost is MCInternal = 18Q.Instructions: Enter your response rounded to the nearest two decimal places.a. What is the socially efficient level of output? unitsb. Which of the following are actions the government could take to induce firms in this industry to produce the socially efficient level of output.Instructions: For correct answers place a check mark. check all that apply Nonrival consumptionunanswered Pollution taxesunanswered Pollution permitsunansweredarrow_forwardshows 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? P Qd Qs1 Qs2 $20 0 10 8 $18 1 9 7 $15 2.5 7.5 5.5 $12 4 6 4 $10 5 5 3 $5 7.5 2.5 0.5arrow_forward
- Describe a situation where you experienced a positive or negative externality or free-riding by you or someone else. Why are these situations problematic?arrow_forwardExplain the difference between positive and negative externalities along with an example.arrow_forwardA negative externality is a cost associated with an action that is not borne by the person who chooses to take that action. Companies that spill oil into the ocean do not bear the full costs of the resulting harm to the marine environment, which include everything from degraded commercial fisheries to reduced endangered sea turtle populations Commuters generate emissions of air pollution, which lowers the ambient quality of the air in areas they pass through and causes health problems for other people. Developers who build houses in bucolic exurban settings cause habitat fragmentation and biodiversity loss, inciting a cost on the public at large. A positive externality is a benefit associated with an action that is not borne by the person who chooses to take that action. A homeowner who installs a rain barrel to collect unchlorinated rainwater for her garden also improves stream habitat in her watershed by reducing stormwater runoff. A delivery company that reoptimizes its routing…arrow_forward
- Give an example of a negative externality that you have witnessed or are personally aware of. Who is affected by this? What can be done to improve the situation?arrow_forwardWhat is the main problem associated with negative externalities? a) They lead to an overallocation of resources. b) They result in inefficiency in resource allocation. c) They encourage competitive markets. d) They have no impact on market outcomes.arrow_forwardWhich 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.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Environmental Law: The Clean Air Act; Author: LawShelf;https://www.youtube.com/watch?v=1-SH3kJpVA4;License: Standard Youtube License