Figure 9.9 shows the demand and supply of a product in a competitive market. FIGURE 9.9 $10 2 10 20 30 40 50 60 20 80 90 100 110 Quantity per period Refer to Figure 9.9 to answer the question. Suppose that this graph represents an industry with big external benefits and that the government has been directed by its constituents to increase its output by 10 units and lower its price. Which of the following will produce this result? Select one: O a. Imposing an excise tax of $2. O b. Granting a subsidy of $1 to producers. O c. Imposing an excise tax of $1. O d. Granting a subsidy of $2 to consumers. O e. Granting a subsidy of $2 to producers.

Figure 9.9 shows the demand and supply of a product in a competitive market. FIGURE 9.9 $10 2 10 20 30 40 50 60 20 80 90 100 110 Quantity per period Refer to Figure 9.9 to answer the question. Suppose that this graph represents an industry with big external benefits and that the government has been directed by its constituents to increase its output by 10 units and lower its price. Which of the following will produce this result? Select one: O a. Imposing an excise tax of $2. O b. Granting a subsidy of $1 to producers. O c. Imposing an excise tax of $1. O d. Granting a subsidy of $2 to consumers. O e. Granting a subsidy of $2 to producers.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 42P: Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the...

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Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?
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.
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.
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?
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.
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?
What is a marketable permit and what incentive does it provide for a firm to account for external costs?