The problem of externality.

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Answer 1

Question

Chapter 18, Problem 1RQ

To determine

The problem of externality.

Expert Solution & Answer

Explanation of Solution

The externality is the consequence faced by the person who is not involved in the action in the form of additional benefit or cost. The externality which is affecting in the form of additional cost to the third party is known as the negative externality and the one that affects with the benefits to the third party is known as the positive externality.

a) Here, the externality is created by the restrictive export policy by the Brazil government and the externality is creating inefficiency in the market. The inefficiency is created through the reduced supply and increased price level in the market which means the price is incapable of indicating the true social value of the product. When the price of coffee increases in the US market, the consumers who are elastic in their demand towards the price would change their consumption from the coffee to its substitute that is tea. As the demand for tea increases in the market, the price of tea also increases which is the effect of the changes in the market demand and supply and not the externality.

b) The advertising blimps are used to provide information to the people. They provide much useful information to the public regarding many issues and causes. Here, the advertising blimp also does the same job of providing the information to the people but the problem is that the positioning of the advertisement blimp is not accurate as it causes distractions to some of the passengers and riders. It is reflected in the accident that the motorcyclist faced. Thus, the blimp is causing additional cost to the rider in the form of medical expenses and the repair expenses of the motorcycle, and so on. Thus, it causes the negative externality to the rider.

Economics Concept Introduction

Externality: The externality is the cost or benefit incurred to the third party who does not choose to take up the cost or benefit as he will not be involved in the process.

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Suppose the marginal social cost of television sets is $100. This is constant and equal to the average cost of television sets. The annual demand for television sets is given by the following equation: Q = 200,000-500P, where Qis the quantity sold per year and P is the price of television sets. a) If television sets are sold in a perfectly competitive market, calculate the annual number sold. Under what circumstances will the market equilibrium be efficient? b) Show the losses in well-being each year that would result from a law limiting sales of television sets to 100,000 per year. Show the effect on the price, marginal social benefit, and marginal social cost of television sets. Show the net loss in well-being that will result from a complete ban on the sales of television sets. (show with graphs.)

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Answer 2

Question

Chapter 18, Problem 1RQ

To determine

The problem of externality.

Expert Solution & Answer

Explanation of Solution

The externality is the consequence faced by the person who is not involved in the action in the form of additional benefit or cost. The externality which is affecting in the form of additional cost to the third party is known as the negative externality and the one that affects with the benefits to the third party is known as the positive externality.

a) Here, the externality is created by the restrictive export policy by the Brazil government and the externality is creating inefficiency in the market. The inefficiency is created through the reduced supply and increased price level in the market which means the price is incapable of indicating the true social value of the product. When the price of coffee increases in the US market, the consumers who are elastic in their demand towards the price would change their consumption from the coffee to its substitute that is tea. As the demand for tea increases in the market, the price of tea also increases which is the effect of the changes in the market demand and supply and not the externality.

b) The advertising blimps are used to provide information to the people. They provide much useful information to the public regarding many issues and causes. Here, the advertising blimp also does the same job of providing the information to the people but the problem is that the positioning of the advertisement blimp is not accurate as it causes distractions to some of the passengers and riders. It is reflected in the accident that the motorcyclist faced. Thus, the blimp is causing additional cost to the rider in the form of medical expenses and the repair expenses of the motorcycle, and so on. Thus, it causes the negative externality to the rider.

Economics Concept Introduction

Externality: The externality is the cost or benefit incurred to the third party who does not choose to take up the cost or benefit as he will not be involved in the process.

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Answer 3

Question

Chapter 18, Problem 1RQ

To determine

The problem of externality.

Expert Solution & Answer

Explanation of Solution

The externality is the consequence faced by the person who is not involved in the action in the form of additional benefit or cost. The externality which is affecting in the form of additional cost to the third party is known as the negative externality and the one that affects with the benefits to the third party is known as the positive externality.

a) Here, the externality is created by the restrictive export policy by the Brazil government and the externality is creating inefficiency in the market. The inefficiency is created through the reduced supply and increased price level in the market which means the price is incapable of indicating the true social value of the product. When the price of coffee increases in the US market, the consumers who are elastic in their demand towards the price would change their consumption from the coffee to its substitute that is tea. As the demand for tea increases in the market, the price of tea also increases which is the effect of the changes in the market demand and supply and not the externality.

b) The advertising blimps are used to provide information to the people. They provide much useful information to the public regarding many issues and causes. Here, the advertising blimp also does the same job of providing the information to the people but the problem is that the positioning of the advertisement blimp is not accurate as it causes distractions to some of the passengers and riders. It is reflected in the accident that the motorcyclist faced. Thus, the blimp is causing additional cost to the rider in the form of medical expenses and the repair expenses of the motorcycle, and so on. Thus, it causes the negative externality to the rider.

Economics Concept Introduction

Externality: The externality is the cost or benefit incurred to the third party who does not choose to take up the cost or benefit as he will not be involved in the process.

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Answer 4

Question

Chapter 18, Problem 1RQ

To determine

The problem of externality.

Expert Solution & Answer

Explanation of Solution

The externality is the consequence faced by the person who is not involved in the action in the form of additional benefit or cost. The externality which is affecting in the form of additional cost to the third party is known as the negative externality and the one that affects with the benefits to the third party is known as the positive externality.

a) Here, the externality is created by the restrictive export policy by the Brazil government and the externality is creating inefficiency in the market. The inefficiency is created through the reduced supply and increased price level in the market which means the price is incapable of indicating the true social value of the product. When the price of coffee increases in the US market, the consumers who are elastic in their demand towards the price would change their consumption from the coffee to its substitute that is tea. As the demand for tea increases in the market, the price of tea also increases which is the effect of the changes in the market demand and supply and not the externality.

b) The advertising blimps are used to provide information to the people. They provide much useful information to the public regarding many issues and causes. Here, the advertising blimp also does the same job of providing the information to the people but the problem is that the positioning of the advertisement blimp is not accurate as it causes distractions to some of the passengers and riders. It is reflected in the accident that the motorcyclist faced. Thus, the blimp is causing additional cost to the rider in the form of medical expenses and the repair expenses of the motorcycle, and so on. Thus, it causes the negative externality to the rider.

Economics Concept Introduction

Externality: The externality is the cost or benefit incurred to the third party who does not choose to take up the cost or benefit as he will not be involved in the process.

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Answer 5

Chapter 18, Problem 1RQ

To determine

The problem of externality.

Expert Solution & Answer

Explanation of Solution

The externality is the consequence faced by the person who is not involved in the action in the form of additional benefit or cost. The externality which is affecting in the form of additional cost to the third party is known as the negative externality and the one that affects with the benefits to the third party is known as the positive externality.

a) Here, the externality is created by the restrictive export policy by the Brazil government and the externality is creating inefficiency in the market. The inefficiency is created through the reduced supply and increased price level in the market which means the price is incapable of indicating the true social value of the product. When the price of coffee increases in the US market, the consumers who are elastic in their demand towards the price would change their consumption from the coffee to its substitute that is tea. As the demand for tea increases in the market, the price of tea also increases which is the effect of the changes in the market demand and supply and not the externality.

b) The advertising blimps are used to provide information to the people. They provide much useful information to the public regarding many issues and causes. Here, the advertising blimp also does the same job of providing the information to the people but the problem is that the positioning of the advertisement blimp is not accurate as it causes distractions to some of the passengers and riders. It is reflected in the accident that the motorcyclist faced. Thus, the blimp is causing additional cost to the rider in the form of medical expenses and the repair expenses of the motorcycle, and so on. Thus, it causes the negative externality to the rider.

Economics Concept Introduction

Externality: The externality is the cost or benefit incurred to the third party who does not choose to take up the cost or benefit as he will not be involved in the process.

Answer 6

Chapter 18, Problem 1RQ

To determine

The problem of externality.

Expert Solution & Answer

Explanation of Solution

The externality is the consequence faced by the person who is not involved in the action in the form of additional benefit or cost. The externality which is affecting in the form of additional cost to the third party is known as the negative externality and the one that affects with the benefits to the third party is known as the positive externality.

a) Here, the externality is created by the restrictive export policy by the Brazil government and the externality is creating inefficiency in the market. The inefficiency is created through the reduced supply and increased price level in the market which means the price is incapable of indicating the true social value of the product. When the price of coffee increases in the US market, the consumers who are elastic in their demand towards the price would change their consumption from the coffee to its substitute that is tea. As the demand for tea increases in the market, the price of tea also increases which is the effect of the changes in the market demand and supply and not the externality.

b) The advertising blimps are used to provide information to the people. They provide much useful information to the public regarding many issues and causes. Here, the advertising blimp also does the same job of providing the information to the people but the problem is that the positioning of the advertisement blimp is not accurate as it causes distractions to some of the passengers and riders. It is reflected in the accident that the motorcyclist faced. Thus, the blimp is causing additional cost to the rider in the form of medical expenses and the repair expenses of the motorcycle, and so on. Thus, it causes the negative externality to the rider.

Economics Concept Introduction

Externality: The externality is the cost or benefit incurred to the third party who does not choose to take up the cost or benefit as he will not be involved in the process.

Answer 7

Chapter 18, Problem 1RQ

To determine

The problem of externality.

Answer 8

Expert Solution & Answer

Explanation of Solution

The externality is the consequence faced by the person who is not involved in the action in the form of additional benefit or cost. The externality which is affecting in the form of additional cost to the third party is known as the negative externality and the one that affects with the benefits to the third party is known as the positive externality.

a) Here, the externality is created by the restrictive export policy by the Brazil government and the externality is creating inefficiency in the market. The inefficiency is created through the reduced supply and increased price level in the market which means the price is incapable of indicating the true social value of the product. When the price of coffee increases in the US market, the consumers who are elastic in their demand towards the price would change their consumption from the coffee to its substitute that is tea. As the demand for tea increases in the market, the price of tea also increases which is the effect of the changes in the market demand and supply and not the externality.

b) The advertising blimps are used to provide information to the people. They provide much useful information to the public regarding many issues and causes. Here, the advertising blimp also does the same job of providing the information to the people but the problem is that the positioning of the advertisement blimp is not accurate as it causes distractions to some of the passengers and riders. It is reflected in the accident that the motorcyclist faced. Thus, the blimp is causing additional cost to the rider in the form of medical expenses and the repair expenses of the motorcycle, and so on. Thus, it causes the negative externality to the rider.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Externality: The externality is the cost or benefit incurred to the third party who does not choose to take up the cost or benefit as he will not be involved in the process.

Answer 12

Ch. 18 - Prob. 1RQ Ch. 18 - Compare and contrast the following three...Ch. 18 - Prob. 3RQ Ch. 18 - Prob. 4RQ Ch. 18 - Prob. 5RQ Ch. 18 - Prob. 6RQ Ch. 18 - George and Stan live next door to each other....Ch. 18 - Prob. 8RQ Ch. 18 - Prob. 9RQ Ch. 18 - Prob. 10RQ

The problem of externality.

Concept explainers

The problem of externality.

Explanation of Solution

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