5) Smoking increases health care costs. Is this an externality? Which of the following statements make sense? A) Not if people pay for their health care themselves. B) Not if their insurance premiums are actuarially adjusted for all the potential health care costs C) Not if smokers bear all the cost of lower productivity, including earlier death. D) Not if smoking is not allowed in public areas. Not if au (such

5) Smoking increases health care costs. Is this an externality? Which of the following statements make sense? A) Not if people pay for their health care themselves. B) Not if their insurance premiums are actuarially adjusted for all the potential health care costs C) Not if smokers bear all the cost of lower productivity, including earlier death. D) Not if smoking is not allowed in public areas. Not if au (such

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter17: Market Failure: Externalities, Public Goods, And Asymmetric Information

Section: Chapter Questions

Problem 12QP

See similar textbooks

Similar questions

Consider two ways to protect your car from theft.The Club (a steering wheel lock) makes it difficult fora car thief to take your car. Lojack (a tracking system)makes it easier for the police to catch the car thiefwho has stolen it. Which of these methods confersa negative externality on other car owners? Whichconfers a positive externality? Do you think there areany policy implications of your analysis?
If an excise tax on cigarettes offsets the negative externalities associated with smoking, it means that: a. The Pareto efficient level of smoking will decline. b. The private marginal benefit of smoking will rise. c. The privately efficient level of smoking will equal the Pareto efficient level. d. The private marginal cost of smoking will decline. 9.In the Principal-Agency relationship in health care markets, the _______ acts as the agent for the ________, the principal. a. Government; insurer. b. Insurer; government. c. Health care provider; patient. d. Patient; health care provider. In the presence of external benefits for a health care service, the private market will generally provide: a. The economically efficient level of output. b. Less than the Pareto efficient level of output. c. More than the Pareto efficient level of output. d. The answer depends on the nature of the benefits
The market inverse supply curve for amoxicillin, an antibiotic with lots of generics, isrepresented by the equation P = 3 + 0.0006QS. The market demand curve is represented byQD = 187,500 − 625P.It is well known that antibiotic use generates negative externalities. How might thegovernment restrict the use of antibiotics? Show this on a demand-supply graph. Thendiscuss a potential unintended consequence of the government’s intervention.
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.
Do you believe higher education provides our economy with a positive externality? Why or why not? Do you believe the steps that the federal government takes to encourage the socially optimal amount of higher education be produced/consumed is appropriate? Too much? Too little? Why? (Use appropriate economic theory to support your position.) 2. Explain why according to the theory of rational ignorance, an individual will decide not to participate in the election process (vote).
please answer all. 5. Correcting for negative externalities - Regulation versus tradablepermits Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation. 2. The government allocates tradable pollution permits. Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces to eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is prohibitively expensive. Firm Cost of Eliminating the... First Unit of Pollution Second Unit…
Consider an infectious disease such as the flu which is spread primarily through virus particles in aerosolized respiratory droplets of already infected people. a In the midst of an infectious disease epidemic of this sort, is it privately rational for people to limit their exposure to other people, perhaps by staying home from work or not going to school? b An infected person who goes out into public areas and does not take precautions to contain their respiratory emissions clearly poses a negative externality on those around them. Does an uninfected person going out into public areas also pose a negative externality? c For a particularly severe disease outbreak of this sort, one possible government response is to exaggerate to the public both the harm that might arise from contracting the disease and the likelihood of contracting the disease. In what ways might such a strategy reduce the harm to the public from the disease epidemic? In what ways might such a strategy increase the…
Based on what you saw in the videos about internalizing externalities, do you think that the "leaving it to the market" approach (i.e., market-based solutions, such as government-imposed incentives toward renewable energy initiatives) is sufficient to transition away from fossil fuels and a linear economy as we try to minimize the already visible impacts of climate change? Or, do you think that a command and control approach is warranted in this case? Explain. Note: I am not judging your position, but am looking at how you support your position given the fundamentals of command and control vs. market-based solutions given our current climate crisis.
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.
Answer all parts please i have to submit this last question soon please 3. Correcting for negative externalities - Regulation versus tradablepermits Suppose the government wants to reduce the total pollution emitted by three local firms. Currently, each firm is creating 4 units of pollution in the area, for a total of 12 pollution units. If the government wants to reduce total pollution in the area to 6 units, it can choose between the following two methods: Available Methods to Reduce Pollution 1. The government sets pollution standards using regulation. 2. The government allocates tradable pollution permits. Each firm faces different costs, so reducing pollution is more difficult for some firms than others. The following table shows the cost each firm faces to eliminate each unit of pollution. For each firm, assume that the cost of reducing pollution to zero (that is, eliminating all 4 units of pollution) is prohibitively expensive. Firm Cost of…
. Some dissenting scientists at Environment Canada disagree with the estimate of $1.50 for theenvironmental externality. They believe that the incidence of the externality is not constant acrossdifferent levels of production; instead the size of the externality is proportional to the level of output.That is, the larger is the output, the larger is the externality. Their research suggests that the truesocial cost of cereal production diverges from private costs at every level of production by an amountequal to ten percent of production (note: ten percent, not ten percentage points).The government would like to know the economic effects of implementing a tax to internalise theexternality in this case. Draw the diagram for this market and policy. Solve for all relevant Ps and Qs.Calculate producer surplus
1. Governments and pharmaceutical companies rushed quickly ahead to develop a vaccine. Vaccinations and immunizations are examples of positive externalities. A positive externality is when an activity creates a benefit for those who are not involved in the transaction, a third party. Let’s examine the vaccination of Covid-19 as a positive externality. Question: Why is the Covid-19 vaccination considered a positive externality? 2. Considering the information provided and your responses to Question 3 explain the potential unintended consequences of each one of these polices. Which policy would you enact and why?