MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Question
Chapter 4, Problem 17SQ
To determine
The impact of external benefits of good X.
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answer the following based on the information provided and the graph
If a positive demand-side externality (also called a positive externality in consumption) occurs, then:
a. The market provides the efficient allocation.
b. The market under-provides the product, meaning the market allocation is less than the efficient allocation.
c. The market does not provided the product, hence market failure occurs.
d. The market over-provides the product, meaning the market allocation is more than the efficient allocation.
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?
Chapter 4 Solutions
MACROECONOMICS 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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Similar questions
- Graphically, the effects of an external benefit can be shown as A. a leftward shift of the market demand curve. B. a leftward shift of the market supply curve. C. a downward movement along the market demand curve. D. a rightward shift of the market demand curve.arrow_forward#8arrow_forwardDefine social benefit.arrow_forward
- Use the graph attached below as a starting point (either download it or print it out). Add curves, labels, etc. to this graph in order to show the following: 1. Show that this good has a $4/unit negative externality (external cost), such as pollution. 2. Shade the area that represents the Deadweight Loss (lost gains from trade) caused by the external cost. 3. Show a tax or subsidy wedge (whichever you think is appropriate) that will solve the problem of the external cost. 4. Show the socially optimal level of production that the Pigouvian tax or subsidy above will help the market to achieve. You may use software or pencil and paper to complete this graph. Upload it here when you are done.arrow_forwardIf a negative supply-side externality (also called a negative externality in production) occurs, then: a. The market provides the efficient allocation. b. The market under-provides the product, meaning the market allocation is less than the efficient allocation. c. The market does not provided the product, hence market failure occurs. d. The market over-provides the product, meaning the market allocation is more than the efficient allocation.arrow_forward1. For each of the goods listed below, discuss whether the good is likely to entail an external cost or an external benefit. Additionally, explain if the market is likely to produce more or less than the social optimal. a. Vaccinations b. Cigarettes c. Antibiotics d. Sriracha saucearrow_forward
- Consider a small town with a factory that produces cell phones. The factory's production causes air pollution, which affects the health of the residents. Draw a graph representing the market for cell phones in this town. Label the socially optimal level of output and the market equilibrium level of output. Explain the difference between the two levels.arrow_forwardSee each of the following characteristics or scenarios about externalities. Choose a correct answer whether each statement matches with the term negative externality or the term positive externality. a. Resources are overallocated. ( Positive, Negative) externality く-ー b. Gini installs a very nice front garden, raising the property values of all the other houses on her block. -- ( Positive, Negative) externality c. Market demand curves are too far to the left (too low).<-- ( Positive, Negative) externality d. Resources are underallocated. <-- ( Positive, Negative) ternality Blank # 1 Blank # 2 Blank # 3 Blank # 4arrow_forwardMatch each of the following characteristics or scenarios with either the term negative externality or the term positive externality. a. Overallocation of resources. b. Tammy installs a very nice front garden, raising the property values of all the other houses on her block. c. Market demand curves are too far to the left (too low). d. Underallocation of resources. e. Water pollution from a factory forces neighbors to buy water purifiersarrow_forward
- 3. Now reconsider the issue of soybeans from the perspective of Chinese consumers. Assume you are a Chinese consumer who drinks soymilk each day. Demonstrate using a graph how your consumption of soymilk differs from the socially optimal level. Is the price you pay for soymilk in current market conditions the correct amount, too high, or too low? Why? Ensure that you label your graph correctly (all curves, axes, price and quantities labeled). Show the deadweight loss of soymilk consumption, and what price should be charged for soymilk to move the amount of soymilk you drink to the optimal level.arrow_forwardReview the graph below to answer this question. This graph reflects a being. produced. Price Popt. EX P1 Q opt. Q1 Quantity MSC MPC MSB _____externality where, at point Q1, the good isarrow_forwardIn what sense do positive externalities cause the so-called "invisible hand" of the marketplace to "fail"? Select one: a. Such externalities lead to government intervention in markets, which exacerbates the problems associated with externalities. Ob. Such externalities eliminate "free-riding" c. In the absence of government intervention, markets with positive externalities often fail to produce the maximur total benefit to society, as measured by total surplus. d. Markets with positive externalities produce too much of the good or service in question.arrow_forward
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