Essentials of Economics
4th Edition
ISBN: 9781464186653
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Chapter P5, Problem 1.3BC
To determine
Regulations to be imposed on a rancher.
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List and explain the two defining characteristics of public goods.
Supply curves for the production of oil in Sanaton are shown in the diagram below. Supply based on both private and private+social costs is shown. Answer the following questions based on the
diagram.
Supply (Private + Social)
Supply (Private)
VE
(16000 $70
(22000,$59)
Demand
Price
Quantity
What is the equilibrium quantity when negative externalities of producing oil are not taken into account?
What is the equilibrium price when negative externalities are not taken into account?
Side 19
A mine owner faces the following marginal cost (MC) function: MC= 100 +15*X
Where X is tons of the mineral extracted
The mining of the mineral has external costs. The marginal external cost (MEC) has the following function: MEC = 5*X
Where X is the tons of the mineral extracted.
The (marginal) price curve (PC) has the following function:
PC= 600 -5*X
Where X is tons of the mineral the bought
What is the optimal extraction level in tons?
Vælg én svarmulighed
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Essentials of Economics
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- What is the economist’s definition of public goods? Why are public goods associated with market failure? How do the free rider problem and shirking contribute to this form of market failurearrow_forwardExplain why the private provision of public goods leads to an inefficient level of public goods.arrow_forwardWhat are the two characteristics of public goods? What is the free-rider problem as it related to public goods? Is U.S. border patrol a public good or a private good? Explain.arrow_forward
- (11) Consider a market with private marginal benefit (quantity demanded) given by PMB = 400 – 4Q, social marginal benefit given by SMB = 400 – 2Q and private marginal cost (quantity supplied) given by PMC = 40 + 4Q. Assume PMC = SMC. (a) Graph these PMB, SMB, and PMC curves. (b) What kind of externality is present? (c) Find the equilibrium price and quantity if producers only respond to private mar- ginal costs.arrow_forwardDefine public goodsarrow_forwardExamine the role of property rights within the context of public goods.arrow_forward
- A glue factory and a steel mill emit smoke containing a chemical that is harmful if inhaled in large amounts.Describe three ways the town government might respond to this externality. What are the pros and cons of each solution?arrow_forwardLarge taxes on energy companies whose production activities cause environmental damage. How does this negative externality affect the allocation of resources? List three things. Include pigovian taxes and marginal costs.arrow_forwardExplain why, in the absence of governmental environmental regulation, competitive markets overproduce goods whose production involves the creation of negative externalities. Provide an example of a good that generates a negative externality.arrow_forward
- What externality problem do you expect in the market for plastic bags? How does the government correct the inefficiency of the market? Explain in detail with diagramarrow_forwardThe figure to the right shows the marginal cost of pollution abatement for two firms, A and B. The firms were initially abating 46 units of pollution each. Now they can trade pollution permits at a price of $22. As a result, firm A sells permits and firm B buys permits. Both firms are now better off and their total saving will be $ (Enter your answer rounded to the nearest whole number.) Dollars per Unit ($) 34 22 10 The Efficiency of Tradable Pollution Permits MCB 31 46 61 Quantity of Pollution Abatement MCA Narrow_forwardSuppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. One of the demand curves below represents the private demand for the vaccine and the other represents the social demand for the vaccine. Price (5/dose) 110T 100 90 80 70 60 50 40 30 20 10 0 0 25 50 75 100 125 150 175 200 225 250 Quantity (doses/day) The total social benefit of 75 doses is: D1 02arrow_forward
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