Market failure.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 4, Problem 1DQ

To determine

Market failure.

Expert Solution & Answer

Explanation of Solution

Market failure can be caused by Externality and Market Power. Externality is when one person actions affect the whole economy. Market Power is when a small group of people have a strong impact on the economy.

A public good is one where consumption in non-excludable and non-rival. Private goods are not profitable because of the free rider problem. If any person desires to start out fireworks and put a charge for the event, the chances of making any good revenue would become dim. In the event of fireworks, one cannot restrict the people outside the event from watching the fireworks as it is non-excludable and it is an example of non-rival because fireworks is visible to everyone. Hence, If 1 person has seen the fireworks; it will not decrease the ability of someone else to see the same fireworks. This is the first type of market failure.

The 2nd potential market failure can be explained as the existence of an externality. Externalities happen when the profit gets accumulated to someone else rather than the original buyer or seller. For example, a person might completely internalize the cost that is incurred by smoking cigarettes, which are the price and the health issues that the person has to face; but the same person cannot internalize the harmful health issues that could harm others, who inhale the smoke from the cigarette.

1^st case: Yes, it is possible for both to occur if an individual feels that the good has a value, such as fireworks, though they still face free-rider issues. For example, a person would like to start a fireworks event and set a charge to see if the event can be made a better show. But as majorities are free-riding from the person’s display, he would start only a small one. If the fireworks display started by that person causes pollution or harm others, then a negative externality might exist.

2^nd case: No, since there is a problem of free-rider organizations that would not be producing any goods. As there are no commodities being produced or consumed, externality factor cannot be considered.

Economics Concept Introduction

Concept introduction:

Market failure: It is a condition, where free markets fail to distribute resources efficiently.

Public goods: Public goods are the goods that have the characteristics of non-rivalry in nature and non-excludability. One person’s consumption should not reduce the availability for other person. It is not advisable to restrict other people to avail the goods they desire.

Externality: Externality refers to the spill over of benefits or cost to the third party other than the immediate market participants.

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

Just Part D please, this is for environmental economics

3. Consider a single firm that manufactures chemicals and generates pollution through its emissions E. Researchers have estimated the MDF and MAC curves for the emissions to be the following: MDF = 4E and MAC = 125 – E Policymakers have decided to implement an emissions tax to control pollution. They are aware that a constant per-unit tax of $100 is an efficient policy. Yet they are also aware that this policy is not politically feasible because of the large tax burden it places on the firm. As a result, policymakers propose a two- part tax: a per unit tax of $75 for the first 15 units of emissions an increase in the per unit tax to $100 for all further units of emissions With an emissions tax, what is the general condition that determines how much pollution the regulated party will emit? What is the efficient level of emissions given the above MDF and MAC curves? What are the firm's total tax payments under the constant $100 per-unit tax? What is the firm's total cost of compliance…

2. Answer the following questions as they relate to a fishery: Why is the maximum sustainable yield not necessarily the optimal sustainable yield? Does the same intuition apply to Nathaniel's decision of when to cut his trees? What condition will hold at the equilibrium level of fishing in an open-access fishery? Use a graph to explain your answer, and show the level of fishing effort. Would this same condition hold if there was only one boat in the fishery? If not, what condition will hold, and why is it different? Use the same graph to show the single boat's level of effort. Suppose you are given authority to solve the open-access problem in the fishery. What is the key problem that you must address with your policy?

Answer 2

Question

Chapter 4, Problem 1DQ

To determine

Market failure.

Expert Solution & Answer

Explanation of Solution

Market failure can be caused by Externality and Market Power. Externality is when one person actions affect the whole economy. Market Power is when a small group of people have a strong impact on the economy.

A public good is one where consumption in non-excludable and non-rival. Private goods are not profitable because of the free rider problem. If any person desires to start out fireworks and put a charge for the event, the chances of making any good revenue would become dim. In the event of fireworks, one cannot restrict the people outside the event from watching the fireworks as it is non-excludable and it is an example of non-rival because fireworks is visible to everyone. Hence, If 1 person has seen the fireworks; it will not decrease the ability of someone else to see the same fireworks. This is the first type of market failure.

The 2nd potential market failure can be explained as the existence of an externality. Externalities happen when the profit gets accumulated to someone else rather than the original buyer or seller. For example, a person might completely internalize the cost that is incurred by smoking cigarettes, which are the price and the health issues that the person has to face; but the same person cannot internalize the harmful health issues that could harm others, who inhale the smoke from the cigarette.

1^st case: Yes, it is possible for both to occur if an individual feels that the good has a value, such as fireworks, though they still face free-rider issues. For example, a person would like to start a fireworks event and set a charge to see if the event can be made a better show. But as majorities are free-riding from the person’s display, he would start only a small one. If the fireworks display started by that person causes pollution or harm others, then a negative externality might exist.

2^nd case: No, since there is a problem of free-rider organizations that would not be producing any goods. As there are no commodities being produced or consumed, externality factor cannot be considered.

Economics Concept Introduction

Concept introduction:

Market failure: It is a condition, where free markets fail to distribute resources efficiently.

Public goods: Public goods are the goods that have the characteristics of non-rivalry in nature and non-excludability. One person’s consumption should not reduce the availability for other person. It is not advisable to restrict other people to avail the goods they desire.

Externality: Externality refers to the spill over of benefits or cost to the third party other than the immediate market participants.

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 4, Problem 1DQ

To determine

Market failure.

Expert Solution & Answer

Explanation of Solution

Market failure can be caused by Externality and Market Power. Externality is when one person actions affect the whole economy. Market Power is when a small group of people have a strong impact on the economy.

A public good is one where consumption in non-excludable and non-rival. Private goods are not profitable because of the free rider problem. If any person desires to start out fireworks and put a charge for the event, the chances of making any good revenue would become dim. In the event of fireworks, one cannot restrict the people outside the event from watching the fireworks as it is non-excludable and it is an example of non-rival because fireworks is visible to everyone. Hence, If 1 person has seen the fireworks; it will not decrease the ability of someone else to see the same fireworks. This is the first type of market failure.

The 2nd potential market failure can be explained as the existence of an externality. Externalities happen when the profit gets accumulated to someone else rather than the original buyer or seller. For example, a person might completely internalize the cost that is incurred by smoking cigarettes, which are the price and the health issues that the person has to face; but the same person cannot internalize the harmful health issues that could harm others, who inhale the smoke from the cigarette.

1^st case: Yes, it is possible for both to occur if an individual feels that the good has a value, such as fireworks, though they still face free-rider issues. For example, a person would like to start a fireworks event and set a charge to see if the event can be made a better show. But as majorities are free-riding from the person’s display, he would start only a small one. If the fireworks display started by that person causes pollution or harm others, then a negative externality might exist.

2^nd case: No, since there is a problem of free-rider organizations that would not be producing any goods. As there are no commodities being produced or consumed, externality factor cannot be considered.

Economics Concept Introduction

Concept introduction:

Market failure: It is a condition, where free markets fail to distribute resources efficiently.

Public goods: Public goods are the goods that have the characteristics of non-rivalry in nature and non-excludability. One person’s consumption should not reduce the availability for other person. It is not advisable to restrict other people to avail the goods they desire.

Externality: Externality refers to the spill over of benefits or cost to the third party other than the immediate market participants.

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 4, Problem 1DQ

To determine

Market failure.

Expert Solution & Answer

Explanation of Solution

Market failure can be caused by Externality and Market Power. Externality is when one person actions affect the whole economy. Market Power is when a small group of people have a strong impact on the economy.

A public good is one where consumption in non-excludable and non-rival. Private goods are not profitable because of the free rider problem. If any person desires to start out fireworks and put a charge for the event, the chances of making any good revenue would become dim. In the event of fireworks, one cannot restrict the people outside the event from watching the fireworks as it is non-excludable and it is an example of non-rival because fireworks is visible to everyone. Hence, If 1 person has seen the fireworks; it will not decrease the ability of someone else to see the same fireworks. This is the first type of market failure.

The 2nd potential market failure can be explained as the existence of an externality. Externalities happen when the profit gets accumulated to someone else rather than the original buyer or seller. For example, a person might completely internalize the cost that is incurred by smoking cigarettes, which are the price and the health issues that the person has to face; but the same person cannot internalize the harmful health issues that could harm others, who inhale the smoke from the cigarette.

1^st case: Yes, it is possible for both to occur if an individual feels that the good has a value, such as fireworks, though they still face free-rider issues. For example, a person would like to start a fireworks event and set a charge to see if the event can be made a better show. But as majorities are free-riding from the person’s display, he would start only a small one. If the fireworks display started by that person causes pollution or harm others, then a negative externality might exist.

2^nd case: No, since there is a problem of free-rider organizations that would not be producing any goods. As there are no commodities being produced or consumed, externality factor cannot be considered.

Economics Concept Introduction

Concept introduction:

Market failure: It is a condition, where free markets fail to distribute resources efficiently.

Public goods: Public goods are the goods that have the characteristics of non-rivalry in nature and non-excludability. One person’s consumption should not reduce the availability for other person. It is not advisable to restrict other people to avail the goods they desire.

Externality: Externality refers to the spill over of benefits or cost to the third party other than the immediate market participants.

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 4, Problem 1DQ

To determine

Market failure.

Expert Solution & Answer

Explanation of Solution

Market failure can be caused by Externality and Market Power. Externality is when one person actions affect the whole economy. Market Power is when a small group of people have a strong impact on the economy.

A public good is one where consumption in non-excludable and non-rival. Private goods are not profitable because of the free rider problem. If any person desires to start out fireworks and put a charge for the event, the chances of making any good revenue would become dim. In the event of fireworks, one cannot restrict the people outside the event from watching the fireworks as it is non-excludable and it is an example of non-rival because fireworks is visible to everyone. Hence, If 1 person has seen the fireworks; it will not decrease the ability of someone else to see the same fireworks. This is the first type of market failure.

The 2nd potential market failure can be explained as the existence of an externality. Externalities happen when the profit gets accumulated to someone else rather than the original buyer or seller. For example, a person might completely internalize the cost that is incurred by smoking cigarettes, which are the price and the health issues that the person has to face; but the same person cannot internalize the harmful health issues that could harm others, who inhale the smoke from the cigarette.

1^st case: Yes, it is possible for both to occur if an individual feels that the good has a value, such as fireworks, though they still face free-rider issues. For example, a person would like to start a fireworks event and set a charge to see if the event can be made a better show. But as majorities are free-riding from the person’s display, he would start only a small one. If the fireworks display started by that person causes pollution or harm others, then a negative externality might exist.

2^nd case: No, since there is a problem of free-rider organizations that would not be producing any goods. As there are no commodities being produced or consumed, externality factor cannot be considered.

Economics Concept Introduction

Concept introduction:

Market failure: It is a condition, where free markets fail to distribute resources efficiently.

Public goods: Public goods are the goods that have the characteristics of non-rivalry in nature and non-excludability. One person’s consumption should not reduce the availability for other person. It is not advisable to restrict other people to avail the goods they desire.

Externality: Externality refers to the spill over of benefits or cost to the third party other than the immediate market participants.

Answer 6

Chapter 4, Problem 1DQ

To determine

Market failure.

Expert Solution & Answer

Explanation of Solution

Market failure can be caused by Externality and Market Power. Externality is when one person actions affect the whole economy. Market Power is when a small group of people have a strong impact on the economy.

A public good is one where consumption in non-excludable and non-rival. Private goods are not profitable because of the free rider problem. If any person desires to start out fireworks and put a charge for the event, the chances of making any good revenue would become dim. In the event of fireworks, one cannot restrict the people outside the event from watching the fireworks as it is non-excludable and it is an example of non-rival because fireworks is visible to everyone. Hence, If 1 person has seen the fireworks; it will not decrease the ability of someone else to see the same fireworks. This is the first type of market failure.

The 2nd potential market failure can be explained as the existence of an externality. Externalities happen when the profit gets accumulated to someone else rather than the original buyer or seller. For example, a person might completely internalize the cost that is incurred by smoking cigarettes, which are the price and the health issues that the person has to face; but the same person cannot internalize the harmful health issues that could harm others, who inhale the smoke from the cigarette.

1^st case: Yes, it is possible for both to occur if an individual feels that the good has a value, such as fireworks, though they still face free-rider issues. For example, a person would like to start a fireworks event and set a charge to see if the event can be made a better show. But as majorities are free-riding from the person’s display, he would start only a small one. If the fireworks display started by that person causes pollution or harm others, then a negative externality might exist.

2^nd case: No, since there is a problem of free-rider organizations that would not be producing any goods. As there are no commodities being produced or consumed, externality factor cannot be considered.

Economics Concept Introduction

Concept introduction:

Market failure: It is a condition, where free markets fail to distribute resources efficiently.

Public goods: Public goods are the goods that have the characteristics of non-rivalry in nature and non-excludability. One person’s consumption should not reduce the availability for other person. It is not advisable to restrict other people to avail the goods they desire.

Externality: Externality refers to the spill over of benefits or cost to the third party other than the immediate market participants.

Answer 7

Chapter 4, Problem 1DQ

To determine

Market failure.

Answer 8

Expert Solution & Answer

Explanation of Solution

Market failure can be caused by Externality and Market Power. Externality is when one person actions affect the whole economy. Market Power is when a small group of people have a strong impact on the economy.

A public good is one where consumption in non-excludable and non-rival. Private goods are not profitable because of the free rider problem. If any person desires to start out fireworks and put a charge for the event, the chances of making any good revenue would become dim. In the event of fireworks, one cannot restrict the people outside the event from watching the fireworks as it is non-excludable and it is an example of non-rival because fireworks is visible to everyone. Hence, If 1 person has seen the fireworks; it will not decrease the ability of someone else to see the same fireworks. This is the first type of market failure.

The 2nd potential market failure can be explained as the existence of an externality. Externalities happen when the profit gets accumulated to someone else rather than the original buyer or seller. For example, a person might completely internalize the cost that is incurred by smoking cigarettes, which are the price and the health issues that the person has to face; but the same person cannot internalize the harmful health issues that could harm others, who inhale the smoke from the cigarette.

1^st case: Yes, it is possible for both to occur if an individual feels that the good has a value, such as fireworks, though they still face free-rider issues. For example, a person would like to start a fireworks event and set a charge to see if the event can be made a better show. But as majorities are free-riding from the person’s display, he would start only a small one. If the fireworks display started by that person causes pollution or harm others, then a negative externality might exist.

2^nd case: No, since there is a problem of free-rider organizations that would not be producing any goods. As there are no commodities being produced or consumed, externality factor cannot be considered.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Concept introduction:

Market failure: It is a condition, where free markets fail to distribute resources efficiently.

Public goods: Public goods are the goods that have the characteristics of non-rivalry in nature and non-excludability. One person’s consumption should not reduce the availability for other person. It is not advisable to restrict other people to avail the goods they desire.

Externality: Externality refers to the spill over of benefits or cost to the third party other than the immediate market participants.

Answer 12

Ch. 4.A - Prob. 1ADQ Ch. 4.A - Prob. 2ADQ Ch. 4.A - Prob. 3ADQ Ch. 4.A - Prob. 1ARQ Ch. 4.A - Prob. 2ARQ Ch. 4.A - Prob. 3ARQ Ch. 4.A - Prob. 1AP Ch. 4 - Prob. 1DQ Ch. 4 - Prob. 2DQ Ch. 4 - Prob. 3DQ

Market failure.

Market failure.

Explanation of Solution

Want to see more full solutions like this?

Chapter 4 Solutions