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

Want to see more full solutions like this?

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

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Summarise the case for government intervention in the education market

Should Maureen question the family about the history of the home? Can Maureen access public records for proof of repairs?

3. Distinguish between a direct democracy and a representative democracy. Use appropriate examples to support your answers. [4] 4. Explain the distinction between outputs and outcomes in social service delivery [2] 5. A R1000 tax payable by all adults could be viewed as both a proportional tax and a regressive tax. Do you agree? Explain. [4] 6. Briefly explain the displacement effect in Peacock and Wiseman's model of government expenditure growth and provide a relevant example of it in the South African context. [5] 7. Explain how unbalanced productivity growth may affect government expenditure and briefly comment on its relevance to South Africa. [5] 8. South Africa has recently proposed an increase in its value-added tax rate to 15%, sparking much controversy. Why is it argued that value-added tax is inequitable and what can be done to correct the inequity? [5] 9. Briefly explain the difference between access to education and the quality of education, and why we should care about the…

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

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

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. AFCT Ch. 31 - Prob. BFCT Ch. 31 - Prob. CFCT Ch. 31 - Prob. 1CTQ Ch. 31 - Prob. 2CTQ Ch. 31 - What would be the appropriate change in the U. S...

Answer to Problem 31.1LO

Explanation of Solution

Want to see more full solutions like this?

Chapter 31 Solutions