For an output level below QE, the value of a unit to a buyer is the cost of a unit to a seller. Suppose a firm that produces for this market employs a private security force that makes town residents, many of whom have no business with the company, feel safer. This scenario is characterized by which is an example of
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Blank 1- equal to/greater than/less than
Blank 2- an externality/market power
Blank 3- consumer surplus/ market failure
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- The state of Colorado requires oil and gas companies who use fracking techniques to retune the land to its original condition after the oil and gas extractions. Table 12.9 shows the total cost and total benefits (in dollars) of this policy. Calculate the marginal cost and the marginal benefit at each quantity (acre) of land restored. See Production. Costs and Industry Structure if you need a refresher on how to calculate marginal costs and benefits. If we apply marginal analysis, what is the optimal amount of land to be restored?2.- Assume that consumers are uniformly distributed along a one-mile stretch of a beach. N ice cream vendors are pondering where to position their carts. The price that they are allowed to charge is fixed by the EACAC (Equal Access to Coolness for All Coalition). (Also, each consumer will buy exactly one ice cream.) (a) Show that there is no equilibrium (in locations) if N=3. (b) Suppose N=5 and vendors position their cart each at one of the (mile) points ( 1/6, 2/6, 3/6, 4/6, 5/6 ) is that an equilibrium?2. Suppose that emissions of sulfur dioxide are managed via a Cap-and-Trade policy. In this circumstance, how can an environmental group, such as Greenpeace, reduce emissions of this pollutant? Explain your answer. How would it effectively result in a reduction in emissions? What is the main obstacle for Greenpeace to achieve this? 3. Explain why a Cap-and-Trade program is more likely to be efficient than a standard. Be specific. 4. Explain why the firm’s MAC-curve is its demand curve for pollution permits.
- 12. A justification for government intervention in the economy arises from the fact that market systems usuallyproduce ________ outcomes, but they do not necessarily produce ________ outcomes.A Efficient; equitableB Equitable; efficientC Efficient; profitableD Profitable; equitableindicate whether you think the statement is true or false andexplain why. 15. The discounted rate is usually positive.16. When constant marginal cost > 0, marginal net benefit (P-MC) increases at the rate ofinterest.17. Hotelling’s rule states that the dynamically efficient allocation occurs when the presentvalue of the marginal net benefit for the last unit produced is equal across time periods.18. Monopolist over-converse resources from a dynamic efficiency perspective.19. When the growth rate in demand exceeds the discount rate, the efficient outcome in acompetitive industry will result in a larger amount of oil available for the future period thanthe current period.20. Biofuels are a back-stop technology for oil and would cause more present production ofoil6c Suppose that the government imposes a constant per-unit tax of 2 centon producers. In the diagram, show the effect of this tax on the prices ofplastic bags faced by buyers and sellers.
- 1. Decide whether the following are true, false, or uncertain and thoroughly explain your reasoning. (a) (Review) If AC > MC at the firm’s chosen output level, then the firm is producing on the upward sloping part of its AC curve. (b) When an unregulated market creates positive externalities it tends to produce too little and when it creates negative externalities tends to produce too much. (c) Charging a toll on an uncongested highway increases total surplus because this creates revenue to pay for building and maintaining the highway. (d) Charging a toll on a congested bridge increases total surplus because it reduces the number of drivers and thereby reduces congestion. (e) If a public good cannot be paid for through user fees, then it should not be provided. (f) The costs of National Parks should be covered by charging admission fees, because we shouldn’t have National Parks if the people who use them are not willing to pay enough to cover these costs. (g) You have been offered…3. Consider a competitive industry with production valued according to a MB = 200 - Q and production entails a private marginal cost MC = 50 + 2Q but also an external cost MCE = 30 + 2Q associated to air pollution resulting from the production process. (c) Assuming that the producers do not have the right to pollute the air but they can legally buy the rights from potential victims, what price pR would they pay for those rights (assume that one right to pollute allows to produce one unit of output)? What quantity of output will producers produce if they have to buy the pollution rights? Is this solution efficient? (d) Answer question (c) for an alternative scenario in which the firms have the right to pollute but potential victims can buy them from them in order to prevent them from polluting too much.A company is considering building a bridge across ariver. The bridge would cost $2 million to build andnothing to maintain. The following table shows thecompany’s anticipated demand over the lifetime ofthe bridge:Price per CrossingNumber of Crossings,in Thousands$8 07 1006 2005 3004 4003 5002 6001 7000 800a. If the company were to build the bridge, whatwould be its profit-maximizing price? Would thatlevel of output be efficient? Why or why not?b. If the company is interested in maximizing profit,should it build the bridge? What would be itsprofit or loss?c. If the government were to build the bridge, whatprice should it charge?d. Should the government build the bridge?Explain.
- Use the following information for questions 3-6. The columns indicate the number of trains running. Total railroad profits are the total profits to the railroad from running the specified number of trains. Total lost farmer profits are total profits the farmer loses from a specified number of trains running. Trains 1 2 3 Total Railroad Profit $100 $200 $300 Total Lost Profit for Farmer $40 $130 $250 If the court were instead to protect the Farmer’s crops with a liability rule, what are joint Railroad-Farmer surplus? A. $140 B. $50 C. $60 D. None of the aboveAssume the cost of producing the goods is zero and each consumer will purchase each good as long as the price is less than or equal to value. Consumer values are the entries in the table. Good X Consumer A Consumer B $3,300 $2,900 Good Y $2,500 $3,400 What is the company's total profit from selling the goods bundled together? OA. $12,600 OB. $10,800 O C. $11.600 OD. $13,4001. Which of the following may not raise money for the government? [A] Power of taxation[B] Police power [C] Power of eminent domain [D] Privatization of government’s capitalassets2. In this power of the State, the person who is parting with his money or property ispresumed to receive a benefit. [A] Taxation [B] Police power [C] Eminent domain [D]Forfeiture power3. (CPA Exam) Police power as distinguished from eminent domain. [A] Just compensationis received by the owner of the property. [B] May be exercised by private individuals. [C]Superior to impairment clause of the Constitution [D] Property is taken by the governmentfor public purposes4. The following are common to the inherent powers of the state, except: [A] They arenecessary attributes of sovereignty [B] They interfere with private rights and property. [C]They affect all persons or public. [D] They are legislative in nature and character.5. The basic principle of taxation which states that taxes must be based on taxpayer’s…