2. Use the graph below to answer the two questions on the right. Price If a positive externality exists and the government intervenes, which curve shifts and in what direction? Ssocial internal If a negative externality exists and the government does intervene, which curve shifts Docial and in what direction? Dinternal Quantity

2. Use the graph below to answer the two questions on the right. Price If a positive externality exists and the government intervenes, which curve shifts and in what direction? Ssocial internal If a negative externality exists and the government does intervene, which curve shifts Docial and in what direction? Dinternal Quantity

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 2PA

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Similar questions

Refer to Table 12.2. The externality created by the refrigerator production was 100. However, once we accounted for both the private and additional external costs, the market price increased by only 50. If the external costs were 100 why did the price only increase by 50 when we accounted for all costs?
Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Fe and Qe. On the graph, shade in the deadweight loss at the market output.
Do market demand curves reflect positive externalities? Why or why not?
Identify the following situations as an example of a negative or a positive externality: You are a birder (bird watcher), and your neighbor has put up several birdhouses in the yard as well as planting trees and flowers that attract birds. Your neighbor paints his house a hideous color. Investments in private education raise your countrys standard of living. Trash dumped upstream flows downstream right past your home. Your roommate is a smoker, but you are a nonsmoker.
Suppose that Sonys R. Is this a private or social benefit?
Assume that the marginal private costs of a film producing fuel-efficient can; is greater than the marginal social costs. Assume that the marginal private benefits of a firm producing fuel efficient cars are the same as the marginal social benefits. Discuss one wags.r that the government cans ï¬‚y to increase production and sales of fuel efficient cars to the socially desirable amount. Hint: the government is flying to affect production through costs, net benefits.
Give an example of a positive externality and an example of a negative externality.
In the Land of Purity, there is only one form of pollution, called gunk. Table 12.14 shows possible combinations of economic output and reduction of gunk, depending on what kinds of environmental regulations you choose. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the percentage reduction of gunk, and with the quantity of economic output on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between K and L, can you say which one is better and why? In the choice between K. and N, can you say which one is better, and why? If you had to guess, which choice would you think is move likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice L or M? Why?