A medical company develops a treatment for spinal cord injuries and allows patient to walk again. In the absence of government intervention in this market, which of the following would take place? Onot enough treatments would be produced for social optimum Othe producer would not make an economic profit Othe social demand for the product would be lower than the private demand Osocial benefits would be lower than private benefits An appropriate government policy would be Otax the production of the medical treatment Osubsidize the production of the medical treatment Otake over the production of the medical treatment Oincrease the private cost of the medical firm

A medical company develops a treatment for spinal cord injuries and allows patient to walk again. In the absence of government intervention in this market, which of the following would take place? Onot enough treatments would be produced for social optimum Othe producer would not make an economic profit Othe social demand for the product would be lower than the private demand Osocial benefits would be lower than private benefits An appropriate government policy would be Otax the production of the medical treatment Osubsidize the production of the medical treatment Otake over the production of the medical treatment Oincrease the private cost of the medical firm

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter8: Market Failure

Section: Chapter Questions

Problem 2P: Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and...

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Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and output. a. Assuming that the production of televisions generates external costs, illustrate the effect of the producers being forced to pay a tax equal to the external costs generated, and indicate the equilibrium output. b. If instead of generating external costs, television production generates external benefits, illustrate the effect of the producers being given a subsidy equal to the external benefits generated, and indicate the equilibrium output.
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.
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Excessive consumption of soft drinks is positively correlated to the incidence of diabetes. Assume that the private total cost of production is PTC(Q)= Q^2 + 2Q. The social cost of soft drinks production is STC(Q)=11.5Q^2. The total benefit of soft drinks production is TB (Q)=50Q-Q^2. What quantity of soft drinks would be produced in a perfectly competitive market? What tax t(s) should the government impose to achieve the socially optimum quantity of soft drinks traded?
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Excessive consumption of soft drinks is positively correlated to the incidence of diabetes. Assume that the private total cost of production is PTC(Q)= Q^2 + 2Q.The social cost of soft drinks production is STC(Q)=11.5Q^2.The total benefit of soft drinks production is TB (Q)=50Q-Q^2.What quantity of soft drinks would be produced in a perfectly competitive market? What tax should the government impose to achieve the socially optimum quantity of soft drinks traded?