Content information: Externality occurs when the action of one economic agent tends to affect the action of the other economic agent. For instance, when someone sitting next to you smokes. The smoke emitted by him will cause a problem to you. But this will not matter to him as he is gaining utility from smoking and does not bear any cost for the smoke.

Question

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Answer 1

Question

Chapter 31, Problem 31.1LO

To determine

Content information:

Externality occurs when the action of one economic agent tends to affect the action of the other economic agent. For instance, when someone sitting next to you smokes. The smoke emitted by him will cause a problem to you. But this will not matter to him as he is gaining utility from smoking and does not bear any cost for the smoke.

Expert Solution & Answer

Answer to Problem 31.1LO

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc... used in the production of goods.

Social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Explanation of Solution

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc.... used in the production of goods.

While, social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Social Cost=Private Cost+External Cost

Market externality occurs when the process of production imposes an external cost on the society. These externalities can be positive or negative.

a. Positive externalities occur when the process of production benefits others, but the producers are not compensated for these external benefits. In this case, social marginal cost is less than private cost by the amount of the marginal benefit.

b. Negative externalities occur when the process of production causes damage to the society in the form of pollution. The producers are not charged for these damages. In case of negative externality, social cost is higher than private marginal costs.

The following methods can be used to correct for externalities:

a. Pigouvian Tax/Subsidy

b. Assigning property rights

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Questions from textbook: Santerre, Rexford, E., and Neun, Stephan P. Health Economics: Theories, Insights, and Industry Studies, 6th Edition, ISBN 13: 978-1-111-822729. Mason, OH: South-Western, Cengage Learning, 2013. 1. Suppose a health expenditure function is specified in the following manner: E = 500 + 0.2Y where E represents annual health care expenditures per capita and Y stands for income per capita. a. Using the slope of the health expenditure function, predict the change in per capita health care expenditures that would result from a $1,000 increase in per capita income. b. Compute the level of per capita health care spending when per capita income takes on the following dollar values: 0; 1,000; 2,000; 4,000; and 6,000. c. Using the resulting values for per capita health care spending in part B, graph the associated health care expenditure function. d. Assume that the fixed amount of health care spending decreases to $250. Graph the new and original health care functions on…

Graph shows the daily market price of jeans when the tax on sellers is set to zero per pair supposed the government institutes attacks of $20.30 per pair to be paid by the seller what is the quantity after tax

Answer 2

Question

Chapter 31, Problem 31.1LO

To determine

Content information:

Externality occurs when the action of one economic agent tends to affect the action of the other economic agent. For instance, when someone sitting next to you smokes. The smoke emitted by him will cause a problem to you. But this will not matter to him as he is gaining utility from smoking and does not bear any cost for the smoke.

Expert Solution & Answer

Answer to Problem 31.1LO

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc... used in the production of goods.

Social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Explanation of Solution

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc.... used in the production of goods.

While, social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Social Cost=Private Cost+External Cost

Market externality occurs when the process of production imposes an external cost on the society. These externalities can be positive or negative.

a. Positive externalities occur when the process of production benefits others, but the producers are not compensated for these external benefits. In this case, social marginal cost is less than private cost by the amount of the marginal benefit.

b. Negative externalities occur when the process of production causes damage to the society in the form of pollution. The producers are not charged for these damages. In case of negative externality, social cost is higher than private marginal costs.

The following methods can be used to correct for externalities:

a. Pigouvian Tax/Subsidy

b. Assigning property rights

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Answer 3

Question

Chapter 31, Problem 31.1LO

To determine

Content information:

Externality occurs when the action of one economic agent tends to affect the action of the other economic agent. For instance, when someone sitting next to you smokes. The smoke emitted by him will cause a problem to you. But this will not matter to him as he is gaining utility from smoking and does not bear any cost for the smoke.

Expert Solution & Answer

Answer to Problem 31.1LO

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc... used in the production of goods.

Social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Explanation of Solution

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc.... used in the production of goods.

While, social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Social Cost=Private Cost+External Cost

Market externality occurs when the process of production imposes an external cost on the society. These externalities can be positive or negative.

a. Positive externalities occur when the process of production benefits others, but the producers are not compensated for these external benefits. In this case, social marginal cost is less than private cost by the amount of the marginal benefit.

b. Negative externalities occur when the process of production causes damage to the society in the form of pollution. The producers are not charged for these damages. In case of negative externality, social cost is higher than private marginal costs.

The following methods can be used to correct for externalities:

a. Pigouvian Tax/Subsidy

b. Assigning property rights

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Answer 4

Question

Chapter 31, Problem 31.1LO

To determine

Content information:

Externality occurs when the action of one economic agent tends to affect the action of the other economic agent. For instance, when someone sitting next to you smokes. The smoke emitted by him will cause a problem to you. But this will not matter to him as he is gaining utility from smoking and does not bear any cost for the smoke.

Expert Solution & Answer

Answer to Problem 31.1LO

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc... used in the production of goods.

Social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Explanation of Solution

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc.... used in the production of goods.

While, social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Social Cost=Private Cost+External Cost

Market externality occurs when the process of production imposes an external cost on the society. These externalities can be positive or negative.

a. Positive externalities occur when the process of production benefits others, but the producers are not compensated for these external benefits. In this case, social marginal cost is less than private cost by the amount of the marginal benefit.

b. Negative externalities occur when the process of production causes damage to the society in the form of pollution. The producers are not charged for these damages. In case of negative externality, social cost is higher than private marginal costs.

The following methods can be used to correct for externalities:

a. Pigouvian Tax/Subsidy

b. Assigning property rights

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Answer 5

Chapter 31, Problem 31.1LO

To determine

Content information:

Externality occurs when the action of one economic agent tends to affect the action of the other economic agent. For instance, when someone sitting next to you smokes. The smoke emitted by him will cause a problem to you. But this will not matter to him as he is gaining utility from smoking and does not bear any cost for the smoke.

Expert Solution & Answer

Answer to Problem 31.1LO

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc... used in the production of goods.

Social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Explanation of Solution

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc.... used in the production of goods.

While, social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Social Cost=Private Cost+External Cost

Market externality occurs when the process of production imposes an external cost on the society. These externalities can be positive or negative.

a. Positive externalities occur when the process of production benefits others, but the producers are not compensated for these external benefits. In this case, social marginal cost is less than private cost by the amount of the marginal benefit.

b. Negative externalities occur when the process of production causes damage to the society in the form of pollution. The producers are not charged for these damages. In case of negative externality, social cost is higher than private marginal costs.

The following methods can be used to correct for externalities:

a. Pigouvian Tax/Subsidy

b. Assigning property rights

Answer 6

Chapter 31, Problem 31.1LO

To determine

Content information:

Externality occurs when the action of one economic agent tends to affect the action of the other economic agent. For instance, when someone sitting next to you smokes. The smoke emitted by him will cause a problem to you. But this will not matter to him as he is gaining utility from smoking and does not bear any cost for the smoke.

Expert Solution & Answer

Answer to Problem 31.1LO

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc... used in the production of goods.

Social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Explanation of Solution

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc.... used in the production of goods.

While, social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Social Cost=Private Cost+External Cost

Market externality occurs when the process of production imposes an external cost on the society. These externalities can be positive or negative.

a. Positive externalities occur when the process of production benefits others, but the producers are not compensated for these external benefits. In this case, social marginal cost is less than private cost by the amount of the marginal benefit.

b. Negative externalities occur when the process of production causes damage to the society in the form of pollution. The producers are not charged for these damages. In case of negative externality, social cost is higher than private marginal costs.

The following methods can be used to correct for externalities:

a. Pigouvian Tax/Subsidy

b. Assigning property rights

Answer 7

Chapter 31, Problem 31.1LO

To determine

Content information:

Externality occurs when the action of one economic agent tends to affect the action of the other economic agent. For instance, when someone sitting next to you smokes. The smoke emitted by him will cause a problem to you. But this will not matter to him as he is gaining utility from smoking and does not bear any cost for the smoke.

Answer 8

Expert Solution & Answer

Answer to Problem 31.1LO

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc... used in the production of goods.

Social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Private costs refer to the cost incurred by the firms in the production of goods and services. These costs include the direct costs the firm pays to purchase capital, labor, raw material, etc.... used in the production of goods.

While, social costs in addition to private costs also include cost to the society. Production of goods and services impose some external costs on the society. The external costs are included in the social cost.

Social Cost=Private Cost+External Cost

Market externality occurs when the process of production imposes an external cost on the society. These externalities can be positive or negative.

a. Positive externalities occur when the process of production benefits others, but the producers are not compensated for these external benefits. In this case, social marginal cost is less than private cost by the amount of the marginal benefit.

b. Negative externalities occur when the process of production causes damage to the society in the form of pollution. The producers are not charged for these damages. In case of negative externality, social cost is higher than private marginal costs.

The following methods can be used to correct for externalities:

a. Pigouvian Tax/Subsidy

b. Assigning property rights

Answer 12

Ch. 31 - Prob. 31.1LO Ch. 31 - Prob. 31.2LO Ch. 31 - Prob. 31.3LO Ch. 31 - Prob. 31.4LO Ch. 31 - Prob. 31.1SC Ch. 31 - Prob. 31.2SC Ch. 31 - Prob. 31.3SC Ch. 31 - Prob. 31.4SC Ch. 31 - Prob. 1CTQ Ch. 31 - Prob. 2CTQ

Answer to Problem 31.1LO

Explanation of Solution

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Chapter 31 Solutions