(a)
To indicate:
Whether the given activity is a positive, negative or no externality.
Answer to Problem 1P
If the cell phone of an audience member loudly rings during a live theatre performance, it will be considered as a negative externality.
Explanation of Solution
The noise of phone bell will create disturbance for the people who are watching the performance. It will divert their attention. Thus, the given activity creates negative externality.
Positive externality:
Positive externality refers to the benefit taken by the third party from the activities of the first two parties. The third party refers to any individual, group or organization that indirectly enjoys the benefit without doing anything in return. The government in the economy encourages schemes that promote positive externality.
Negative externality:
Negative externality refers to the losses bared by the third party due to the activities of the first two parties. The third party is usually an individual or an organization. In the economy, the first two parties are generally the producers and the consumers.
No externality:
No externality refers a situation where no benefit or loss is incurred by the third party over the activities of the first two parties.
(b)
To indicate:
Whether the given activity is a positive, negative or no externality.
Answer to Problem 1P
Giving a flu shot to an individual will be considered as a positive externality.
Explanation of Solution
The flu shot reduce the chances of catching flu from one individual to another. It is beneficial for the society. Therefore, it will create positive externality.
Positive externality:
Positive externality refers to the benefit taken by the third party from the activities of the first two parties. The third party refers to any individual, group or organization that indirectly enjoys the benefit without doing anything in return. The government in the economy encourages schemes that promote positive externality.
Negative externality:
Negative externality refers to the losses bared by the third party due to the activities of the first two parties. The third party is usually an individual or an organization. In the economy, the first two parties are generally the producers and the consumers.
No externality:
No externality refers a situation where no benefit or loss is incurred by the third party over the activities of the first two parties.
(c)
To indicate:
Whether the given activity is a positive, negative or no externality.
Answer to Problem 1P
The purchasing and drinking of soda during a break is an activity which has no externality.
The activity will create no externality as drinking soda during a break from class will not benefit or harm anyone in the third party.
Explanation of Solution
The purchasing and drinking of soda during a break is an activity which has no externality.
Positive externality:
Positive externality refers to the benefit taken by the third party from the activities of the first two parties. The third party refers to any individual, group or organization that indirectly enjoys the benefit without doing anything in return. The government in the economy encourages schemes that promote positive externality.
Negative externality:
Negative externality refers to the losses bared by the third party due to the activities of the first two parties. The third party is usually an individual, organization. In the economy, the first two parties are generally the producers and the consumers.
No externality:
No externality refers a situation where no benefit or loss is incurred by the third party over the activities of the first two parties.
(d)
To indicate:
Whether the given activity is a positive, negative or no externality.
Answer to Problem 1P
The cleaning up of trash by the college fraternity and sorority along a two-mile stretch on the highway is considered as positive externality.
Explanation of Solution
Cleaning up the highway will benefit the third party,as drivers on the highway will have clean and clear roads that will create a pleasant feeling. Therefore, it will create a positive externality.
Positive externality:
Positive externality refers to the benefit taken by the third party from the activities of the first two parties. The third party refers to any individual, group or organization that indirectly enjoys the benefit without doing anything in return. The government in the economy encourages schemes that promote positive externality.
Negative externality:
Negative externality refers to the losses bared by the third party due to the activities of the first two parties. The third party is usually an individual or an organization. In the economy, the first two parties are generally the producers and the consumers.
No externality:
No externality refers a situation where no benefit or loss is incurred by the third party over the activities of the first two parties.
(e)
To indicate:
Whether the given activity is a positive, negative or no externality.
Answer to Problem 1P
The dumping of chemical wastes by a firm into a water reservoir will be considered under negative externality.
Explanation of Solution
Dumping of chemicals in local water reservoir will affect the localities, as it will pollute the water body and would not be fit for consumption purpose.Thus, it will harm the third party. Therefore, it will create negative externality.
Positive externality:
Positive externality refers to the benefit taken by the third party from the activities of the first two parties. The third party refers to any individual, group or organization that indirectly enjoys the benefit without doing anything in return. The government in the economy encourages schemes that promote positive externality.
Negative externality:
Negative externality refers to the losses bared by the third party due to the activities of the first two parties. The third party is usually an individual or an organization. In the economy, the first two parties are generally the producers and the consumers.
No externality:
No externality refers a situation where no benefit or loss is incurred by the third party over the activities of the first two parties.
(f)
To indicate:
Whether the given activity is a positive, negative or no externality.
Answer to Problem 1P
The playing of loud music by an individual down the hall will be considered as a negative externality.
Explanation of Solution
The loud music will disturb the sleep, therefore, the activity will create negative externality.
Positive externality:
Positive externality refers to the benefit taken by the third party from the activities of the first two parties. The third party refers to any individual, group or organization that indirectly enjoys the benefit without doing anything in return. The government in the economy encourages schemes that promote positive externality.
Negative externality:
Negative externality refers to the losses bared by the third party due to the activities of the first two parties. The third party is usually an individual or an organization. In the economy, the first two parties are generally the producers and the consumers.
No externality:
No externality refers a situation where no benefit or loss is incurred by the third party over the activities of the first two parties.
Want to see more full solutions like this?
- compare and/or contrast the two plays we've been reading, Antigone and A Doll's House.arrow_forwardPlease answer step by steparrow_forwardSuppose there are two firms 1 and 2, whose abatement costs are given by c₁ (e₁) and C2 (е2), where e denotes emissions and subscripts denote the firm. We assume that c{(e) 0 for i = 1,2 and for any level of emission e we have c₁'(e) # c₂' (e). Furthermore, assume the two firms make different contributions towards pollution concentration in a nearby river captured by the transfer coefficients ε₁ and 2 such that for any level of emission e we have C₂'(e) # The regulator does not know the resulting C₁'(e) Τι environmental damages. Using an analytical approach explain carefully how the regulator may limit the concentration of pollution using (i) a Pigouvian tax scheme and (ii) uniform emissions standards. Discuss the cost-effectiveness of both approaches to control pollution.arrow_forward
- Bill’s father read that each year a car’s value declines by 10%. He also read that a new car’s value declines by 12% as it is driven off the dealer’s lot. Maintenance costs and the costs of “car problems” are only $200 per year during the 2-year warranty period. Then they jump to $750 per year, with an annual increase of $500 per year.Bill’s dad wants to keep his annual cost of car ownership low. The car he prefers cost $30,000 new, and he uses an interest rate of 8%. For this car, the new vehicle warranty is transferrable.(a) If he buys the car new, what is the minimum cost life? What is the minimum EUAC?(b) If he buys the car after it is 2 years old, what is the minimum cost life? What is the minimum EUAC?(c) If he buys the car after it is 4 years old, what is the minimum cost life? What is the minimum EUAC?(d) If he buys the car after it is 6 years old, what is the minimum cost life? What is the minimum EUAC?(e) What strategy do you recommend? Why? Please show each step and formula,…arrow_forwardO’Leary Engineering Corp. has been depreciating a $50,000 machine for the last 3 years. The asset was just sold for 60% of its first cost. What is the size of the recaptured depreciation or loss at disposal using the following depreciation methods?(a) Straight-line with N = 8 and S = 2000(b) Double declining balance with N = 8(c) 40% bonus depreciation with the balance using 7-year MACRS Please show every step and formula, don't use excel. The answer should be (a) $2000 loss, (b) $8000 deo recap, (c) $14257 dep recap, thank you.arrow_forwardThe cost of garbage pickup in Green Gulch is $4,500,000 for Year 1. The population is increasing at 6%, the nominal cost per ton is increasing at 5%, and the general inflation rate is estimated at 4%.(a) Estimate the cost in Year 4 in Year-1 dollars and in nominal dollars.(b) Reference a data source for trends in volume of garbage per person. How does including this change your answer? Please show every step and formula, don't use excel. The answer should be $6.20M, $5.2M, thank you.arrow_forward
- Please show each step with formulas, don't use Excel. The answer should be 4 years, $16,861.arrow_forwardAssume general inflation is 2.5% per year. What is the price tag in 8 years for an item that has an inflation rate of 4.5% that costs $700 today? Please show every step and formula, don't use excel. The answer should be $1203, thank you.arrow_forwardThe average cost of a certain model car was $22,000 ten years ago. This year the average cost is $35,000.(a) Calculate the average monthly inflation rate (fm) for this model.(b) Given the monthly rate fm, what is the effective annual rate, f, of inflation for this model?(c) Estimate what these will sell for 10 years from now, expressed in today’s dollars. Please show all steps and formulas, don't use excel. The answer should be (a) 0.3877%, (b) 4.753%, (c) $55,682arrow_forward
- A mining corporation purchased $120,000 of production machinery and depreciated it using 40% bonus depreciation with the balance using 5-year MACRS depreciation, a 5-year depreciable life, and zero salvage value. The corporation is a profitable one that has a 22% combined incremental tax rate. At the end of 5 years the mining company changed its method of operation and sold the production machinery for $40,000. During the 5 years the machinery was used, it reduced mine operation costs by $32,000 a year before taxes. If the company MARR is 12% after taxes, was the investment in the machinery a satisfactory one? Please show every step with formulas and don't use excel. The answer should be 14.8%, thank you.arrow_forwardAn engineer is working on the layout of a new research and experimentation facility. Two operators will be required. If, however, an additional $100,000 of instrumentation and remote controls were added, the plant could be run by a single operator. The total before-tax cost of each plant operator is projected at $35,000 per year. The instrumentation and controls will be depreciated by means of a modified accelerated cost recovery system (MACRS). If this corporation (22% combined corporate tax rate) invests in the additional instrumentation and controls. how long will it take for the after-tax benefits to equal the $100,000 cost? In other words, what is the after-tax payback period? Please write out every step and formula, don't use excel. The answer should be 3.08 years, thank you.arrow_forwardThe effective combined tax rate in a firm is 28%. An outlay of $2 million for certain new assets is under consideration. Over the next 9 years, these assets will be responsible for annual receipts of $650,000 and annual disbursements (other than for income tax) of $225,000. After this time, they will be used only for stand-by purposes with no future excess of receipts over disbursements. (a) What is the prospective rate of return before income taxes? (b)What is the prospective rate of return after taxes if straight-line depreciation can be used to write off these assets for tax purposes in 9 years? (c) What is the prospective rate of return after taxes if it is assumed that these assets must be written off for tax purposes over the next 20 years, using straight-line depreciation? Please write out each step with formulas and don't use Excel. The answers should be (a)15.4% (b) 11.5% (c) 10.0%, thank youarrow_forward
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Principles of MicroeconomicsEconomicsISBN:9781305156050Author:N. Gregory MankiwPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning