WEEK 3 DISC Incentives and Externalities ECON 103

Price and Cost B. (A E. Q2 Q1 Quantity Analyzing the prior graph which type of externality is this? Which line is the private and which is the public? What quantity does the private market produce, which quantity does the public want? Now give three (3) examples of this type of externality.

Define externality and please make sure to include three (3) key characteristics of the effects of an externality in your answer.

tidterm Exam #2 Alternative Back to Assignment Attempts 3. Keep the Highest 3/4 S. Externalities - Definition and examples An externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives any compensation for that effect. If the Impact on the third party is adverse, it is called a extemality. The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. Adjust one or both of the curves to reflect the presence of the externality. af the social cost of producing the good is not egual to the private cost, then you should drag the supply curve to reflecet the social costs of producing the good; simiarly, f the social value of producing the pood is not equal to the private value, then you should drag the demand curve to reflect the social value of consuming the good. Supply Demand…

What is the principal question Coase posits when it comes to negative externalities? Who should be allowed to inflict harm on whom?   Who is morally correct in any given argument about harm?   How large is the harm caused?

1-) Can an activity generate both positive and negative externalities at the same time? Give anexample from your life and explain your answer.

One way that externalities can be eliminated is to Question 53Select one: a. increase competition b. regulate production or consumption c. increase transaction costs d. ensure perfect market information e. relax enforcement of property rights

Define externalities. Also give an example of a negative externality

Two countries the US (U) and Fiji (F). Each country i E {U, F} can decide whether to impose a positive tax on the emissions of its polluting firms (t;> 0) or to impose no tax (t; = 0). We can think of a representative firm that chooses whether to produce using a polluting technology (q = P) or a clean technology (q = C). The polluting technology generates profits of (P) = 11. The clean technology generates profits of л(P) = 10 and doesn't have to pay tax. Imposing a tax of t = 1, profits of firms using polluting technology would equal profits of firms using clean. Assume that when the firm is indifferent between the two technologies, it chooses the clean technology. technology. Let us now turn to the decisions that the governments would make if they were inde- pendently choosing whether to impose a tax or not. In the US, firms using the clean technology emit a total of 0 tonnes of CO2 emissions, while firms using the polluting technology emit a total of 900 tonnes of CO2 emissions. In…

Analyzing the prior graph which type of externality is this? Which line is the private and which is the public? What quantity does the private market produce, which quantity does the public want? Now give three (3) examples of this type of externality. Analyzing the prior graph which type of externality is this? Which line is the private and which is the public? What quantity does the private market produce, which quantity does the public want? Now give three (3) examples of this type of externality.   C) Explain how externalities can be solved

3

Answer the following questions for the given example: Using water pumps in homes (a) Does an externality exist? If so, is it positive/negative (or both) (b) Use Coase’s framework to identify the cause of the externality (c) If an externality exists, determine whether the Coase theorem applies (i.e. is it possible/feasible to assign property rights and solve the problem?). Provide reasoning.  (d) If an externality exists and the Coase theorem does not apply, discuss a government/institutional solution that can mitigate the problem of externality. Provide reasoning.

i am having trouble with this question macroeconmics chapter 5 question 4

5

Please help with question 14. Thank you.

a. According to Economist Vilfredo Pareto, a condition of ‘Pareto Optimality’, which refers to efficient allocation of natural resources such that no reallocation of resources of such could benefit any person without lowering the net benefits for at least one other person, cannot be attained in the presence of Externalities. Explain how externalities affect the condition of Pareto Optimality using suitable examples of each type of the externalities.

Homework (Ch 10) 7. Correcting for negative externalities - Taxes versus tradablepermits Power stations emit sulfur dioxide as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of power production. Suppose the U.S. government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of sulfur dioxide). The following graph shows the daily demand for pollution rights. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool 90 Daily Demand for Pollution Rights 81 I Price (Dollars per ton) 72 Quantity Demanded (Millions of tons) 180 E 63 8 54 45 36 27 Demand…

Assume a market for fertilizers, and let D denote the demand of fertilizers while S their supply. The inverse demand is p = 10 - q, and the supply is MC = q. The marginal damage created by  runoff water being exposed to fertilizers is MEC = q/2 The use of fertilizers is creating an externality and the government wishes to intervene in the market. Use a figure to depict the competitive outcome. Derive the competitive equilibrium outcome. Use a second figure to explain the negative externality attributed to the use of fertilizers. The use of fertilizers improves yield, but it also damages the underground aquifer. What is the Pigovian Tax? Use a figure to explain. Can it be used to correct for the externality? Derive the Pigovian tax and characterize the social optimum solution. Can a standard achieve the social optimum? What about a quota? Explain using a figure. Explain and show step-by-step for last two questions please!

Externalities and Public Goods – End of Chapter Problem In 2018, a wind farm developer was ordered by the Iowa state appeals court to dismantle its newly constructed wind turbines after adjacent residents filed a lawsuit complaining that they never consented to the loud noise and visual obstructions of the turbines. How could the wind farm developer have utilized insights from the Coase Theorem to avoid its legal troubles and ultimately wasting millions of dollars on wind turbines it never got to operate? Select all situations that would apply. The developer could have asked the government to set a quota on electricity generation for the wind farm so there would be down time from the noise. The developer could have petitioned the local and state government to fund the wind farm. The developer could have invested in improved infrastructure for power generation to lower residents' electricity costs as well as to promote the use of wind farms. The developer could have paid people living…

Hand written solutions are strictly prohibited

2. In this question we will combine a very simplified model of an externality that has long-lasting impacts with the model of discounted utility that we learned in our game theory topic. Consider a hypothetical environmental externality: produced as the byproduct of industrial activity, each unit of emission of a pollutant that is emitted once, today, causes $10 of external harm to society each and every year, starting immediately, forever. Let's say that policymakers apply a discount factor of 8 € (0, 1) to future gains and losses, in an analog of the discounted utility model except for cash payoffs rather than utilities. What would the socially efficient Pigouvian tax on the emission of this pollutant be if we applied a discount factor of (i) 8 = 0.5, (ii) 6 = 0.9, and (iii) 8 = 0.99? Give an intuitive explanation of how to interpret the parameter & in this context, and explain precisely but in simple terms what the goal and effect of the Pigouvian tax would be.

1. If you were to graph a measure of pollution on one axis and a level of economic activity (such as the real gross domestic product per person) on the other, what type of relationship do you think you would find? How would you explain this relationship? 2. Think of an externality that arises in a college dorm. What market can you think of that would (or could) eliminate any inefficiencies from that externality?  

3. The Centers for Disease Control and Prevention (CDC) has a new vaccine against a disease and are trying to determine the optimal percentage of the population that should be vaccinated. They do not recommend vaccinating the whole population against the smallpox virus because the vaccine has undesirable, and sometimes fatal, side effects. Suppose the following table gives the data about the effects of the vaccine.  a. Calculate the Marginal Benefit (in terms of how many extra lives are saved by the vaccine) and the marginal cost (in terms of how many extra lives are lost due to side effects) of each 10% increment of the vaccination. Write your answers on the appropriate columns above. b. Using marginal thinking, determine the optimal percentage of the population that should be vaccinated. Explain your answer.

Questions 1-4 The Alpha, Beta, and Gamma residents of a village are install street lights along the main street of the village The marginal benefit (Am) of the streetlights is: - Alpha: Am = 10.000-80x. - Beta: Am = 8.000-90x. - Gamma: Am = 14.000-70x 1. If a streetlight costs $8,000, what is the optimal collective number of streetlights? а. 25. b. 65. с. 100 d. 110 2. What is the marginal benefit of Alpha at the optimal number of street lights? а. О. b. 2,000 с. 3,500. d. 4,500. 3. What is the marginal benefit of Gamma at the optimal number of street lights? а. О. b. 6,000. с. 7,000 d. 9,000 4. How will Citizen Beta react to the proposal to levy a flat tax of $5,000 per citizen per streetlight to fund the development of streetlights? He a. Will be willing to pay the tax. b. will refuse to pay the tax. c. is unable to conclude whether Beta will be willing to pay the tax or not. d. will be indifferent to the "neither for nor against" street lights.