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- 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?Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost?As the extent of environmental protection expands, would you expect the marginal benefits of environmental protection to rise or fall? Why or why not?
- 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.Give an example of a positive externality and an example of a negative externality.What is a pollution charge and what incentive does it provide for a firm to take external costs into account?
- 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.A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwoods forest and grow com, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, 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 T and R, decide which one is better. Why? In the choice between T and S, can you say which one is better, and why? If you had to guess, which choice would you think is more likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment: a. The cost of producing Zlurp is 150, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) How many bottles will each Whovillian consume? What is each persons consumer surplus? b. Producing Zlurp creates pollution. Each bottle has an external cost of 1. Taking this additional cost into account, what is total surplus per person in the allocation you described in part (a)? c. Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by one bottle. What happens to Cindys welfare (her consumer surplus minus the cost of pollution she experiences)? How does Cindys decision affect total surplus in Whoville? d. MayorCrinch imposes a 1 tax on Zlurp. What is consumption per person now? Calculate consumer surplus, the external cost, government revenue, and total surplus per person. e. Based on your calculations, would you support the mayors policy? 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.warten population manghe ecosystem's Carrying capacity? 6. We have the following data for Demand Price and Costs for our product. Quantity Demand Price Costs 300 100 $21.63 $35.35 $5040.00 $2347.67 500 $17.25 $7481.67 1000 $12.70 $12469.67 1500 $10.26 $16196.00 We have reason to believe that the Demand Price is a power (exponential) function of some kind. Our Cost function is close to linear, but we expect, from some market analysis, that it is in fact quadratic. Approximate this data with a Demand Price function and a Cost function. Explain how confident you are; that is, how much error do you think is reasonable in this type of scenario? 区What is targedy of commons?
