Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Chapter 4, Problem 16SQ
To determine
The impact of freely allowing the firms to pollute the environment.
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Let the supply and demand for widgets be given by the following schedule.
Price: 3, 4, 5, 6, 7, 8, 9, 10, 11
Quantity Supplied: 100, 200, 300, 400, 500, 600, 700, 800, 900
Quantity Demanded: 900, 800, 700, 600, 500, 400, 300, 200, 100
a. What quantity will be produced here?
b. What quantity is efficient if there are no external costs or benefits?
c. What quantity is efficient if there is an external cost of $6 per unit from pollution caused by the widget factories?
This summer, the temperature records on each other's feet seem to be beaten. In Sweden, the temperature has recently risen to 43 degrees and birds are falling from the sky over exhausted and dying. Carbon emissions are one of the main challenges facing mankind today. Explain the market failure caused by the emissions. Under competitive conditions, the government can use various control tools to establish efficient quantities, e.g. with a fee.
Show the effect of such a solution on a diagram and explain in detail why an economical amount involves some pollution.
In a monopoly situation, it is not as simple as establishing efficiency by charging emissions. Explain in words and pictures how the different interplay between the cost factors of a company and pollution costs can cause certain government tariffs on pollution to be cost-effective on the one hand and inefficient on the other.
Soybeans are produced and sold in a perfectly competitive market. The fertilizers used in soybean production generate a negative externality by seeping liquid contaminants into local rivers.
(a) Draw a correctly labeled graph of the soybean market, and show each of the following.
(i) The marginal private cost, labeled MPC
(ii) The marginal social cost, labeled MSC
(iii) The marginal social benefit, labeled MSB
(iv) The market equilibrium quantity, labeled QC
(v) The socially optimal quantity, labeled QS
(vi) The area of the deadweight loss, shaded completely
(b) Assume the government sets a binding price floor such that the quantity demanded in the market is between QS and QC.
(i) What will happen to the quantity produced?
(ii) Will the price floor reduce the deadweight loss? Explain.
(c) Assume instead of a price floor, the government decides to impose a lump-sum tax. What will happen to the socially optimal quantity? Explain.
(d) Assume instead of a lump-sum tax, the government…
Chapter 4 Solutions
Micro Economics For Today
Ch. 4.2 - Prob. 1YTECh. 4.2 - Prob. 2YTECh. 4.2 - Prob. 3YTECh. 4.2 - Prob. 4YTECh. 4.3 - Prob. 1YTECh. 4.3 - Prob. 2YTECh. 4 - Prob. 1SQPCh. 4 - Prob. 2SQPCh. 4 - Prob. 3SQPCh. 4 - Prob. 4SQP
Ch. 4 - Prob. 5SQPCh. 4 - Prob. 6SQPCh. 4 - Prob. 7SQPCh. 4 - Prob. 8SQPCh. 4 - Prob. 9SQPCh. 4 - Prob. 10SQPCh. 4 - Prob. 1SQCh. 4 - Prob. 2SQCh. 4 - Prob. 3SQCh. 4 - Prob. 4SQCh. 4 - Prob. 5SQCh. 4 - Prob. 6SQCh. 4 - Prob. 7SQCh. 4 - Prob. 8SQCh. 4 - Prob. 9SQCh. 4 - Prob. 10SQCh. 4 - Prob. 11SQCh. 4 - Prob. 12SQCh. 4 - Prob. 13SQCh. 4 - Prob. 14SQCh. 4 - Prob. 15SQCh. 4 - Prob. 16SQCh. 4 - Prob. 17SQCh. 4 - Prob. 18SQCh. 4 - Prob. 19SQCh. 4 - Prob. 20SQ
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- Use the table below to answer the questions: A. Find the equilibrium price, assuming sellers ignore negative externalities. B. Find the equilibrium quantity, assuming sellers ignore negative externalities. C. Find the optimal price, including external costs. Find the optimal quantity, including external costs.arrow_forwardExplain the concept of an externality. Explain and show graphically how externalities lead to market failure and an inefficient allocation of resources.arrow_forwardThe many identical residents of Whoville love drinking Zlurp.each resident has the following willingness to pay for the tasty refreshment: a.The cost of producing Zlurp is $150,and the competitive suppliers sell it at this price.The supply curve is horizontal .How many bottles will each whovillian consume?What is each person's consumer surplus? b.Producing Zlurp creates pollution.each bottle has an external cost of $1.Taking this additional cost into account,what is total surplus per person in the allocation you described in part(a). c.Cindy Lou Who,one of the residents of Whoville,decides on her own to reduce her consumption of Zlurp by one bottle.what happens to the Cindy's welfare (her consumer surplus minus the cost of pollution she experiences)?How does Cindy's decision affect total surplus in Whoville? d.Mayor Crinch imposes a $1 tax on Zlurp.What is consumption per person now?Calculate consumer surplus,the external cost ,the government revenue,and total surplus per person.…arrow_forward
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