Whether Y's economic reasoning correct when she failed to return the library book on time which imposes a negative externality on other students and she claimed that the library should
charge a huge fine rather than charging a modest fine for late returns, so that borrowers will never return a book late.
Explanation of Solution
No, Y’s economic reasoning is not correct because it is socially optimal if students occasionally fail to return the book on time and by allowing some to be late then there would be a marginal
Furthermore, in this situation, allowing the overdue patron to return the book another day would increase the total social benefit more than the total social cost. As a result, it would be appropriate to charge a reasonable fine that aids the library in reducing the number of days that the book can be returned late in accordance with the socially optimal number of days.
Introduction: When a decision is made by comparing the costs and benefits of any situation, it is called economic reasoning.
Chapter 74 Solutions
Krugman's Economics For The Ap® Course
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education