For each of the following, indicate whether the statement is True, False, or Uncertain, and explain your answer. (No credit will be given without an explanation.) In the exchange problem, it is inefficient to give everything to one person. In the Lindahl mechanism, everyone pays the same price for a public good. The socially efficient solution is to not produce any externality.

For each of the following, indicate whether the statement is True, False, or Uncertain, and explain your answer. (No credit will be given without an explanation.) In the exchange problem, it is inefficient to give everything to one person. In the Lindahl mechanism, everyone pays the same price for a public good. The socially efficient solution is to not produce any externality.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 1PA

See similar textbooks

Similar questions

The Coase theorem states that if transactions costs are low, property rights are assigned, and parties understand how much they value something, private bargaining will result in an efficient solution to the problem of externalities. government intervention is always needed if externalities are present. a free market equilibrium is the best solution to address externalities. assigning property rights is the only thing the government should do in a market economy.
The Lindahl model presupposes that the public good is delivered in such a way that everyone ____________ from it.
Which of the following statements are true? (more than once could be correct, deductions for incorrect answers). A. Perfectly competitive markets with many buyers and sellers can normally internalize externalities via natural market forces and therefore do not normally call for policy intervention. B. Negative externalities cause too much production and consumption of a good relative to the social optimum while positive externalities cause too little production and consumption of a good relative to the social optimum. C. Negative externalities cause too little production and consumption of a good relative to the social optimum while positive externalities cause too much production and consumption of a good relative to the social optimum. D. Both positive and negative externalities in an otherwise perfectly competitive market cause deadweight loss. E. Negative externalities in otherwise perfectly competitive markets cause deadweight loss while positive externalities actually improve…
What is a negative externality? Group of answer choices -When there is a cost involved in the production of a good -When the production or consumption of a good results in a negative spillover to society that is not paid for by the business or the consumer. -When there is a benefit involved in the production of a good -When there is an external negativity, such as an outsider criticizing a product.
The following graph represents the market for high-emissions cars. Answer this question assuming that the externality is not internalised. 1. What is the private value of the last unit traded (or the willingness to pay of the marginal buyer) in the market? 2. What is the private cost of the last unit produced and traded (or the private cost to the marginal seller) in the market? 3. What is the social cost of the last unit traded in the market? 4. In the stylised model, what is the cost of pollution per high-emission vehicle purchased by buyers equal to?
How does Coase's theorem solve the problem of externalities without the need for government intervention?
Education confers many external benefits on society: a higher-paid workforce, more technological innovation, a more informed electorate, and so on. Therefore, the market equilibrium quantity of education is not equal to the socially optimal quantity. The following graph shows the demand for education (its private value), the supply of education (the private cost of producing it), and the social value of education, including both the private value and external benefits. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.
Viral infections such as flu are highly contagious. The number of infections and thus the spread of the disease can be prevented by getting vaccinated. However, the decision to take vaccine is voluntary and some people choose not to go for it for various reasons.] [What type of externality occurs by getting vaccinated against contagious diseases? Explain your answer in 100 words or less. [In a diagram, show the market equilibrium quantity of the vaccine. Is the quantity also socially efficient? Explain in 100 words or less and demonstrate using the same diagram. [Suggest one method to achieve a socially efficient outcome. Explain your answer in 100 or less words.
What conditions are needed for the Coase Theorem to be a viable way to correct externalities?
Which of the following is a characteristic of a public good, as defined by economists? Group of answer choices -Any good that the government provides is a public good. -The good is free, such as education. -The good is nonexcludable -The good is depletable (or rivalrous).
Consider a situation where Barack (B) and Michelle (M) have demands for a public good that can be represented by the following functions: D_B: Q_B = 24 - 2P_B D_M: Q_M = 18 - 2P_M If Barack and Michelle are the only two consumers of this public good and the supply function for the good is: S: Q = -1 + P What is the socially optimal quantity of the public good?
Answer the question based on the following information for a public good. Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it. These people are the only two members of society. Q Pa Pb 1 $ 3 $ 5 2 2 4 3 1 3 4 0 2 5 0 1 The collective willingness of this society to pay for the fourth unit of this public good is Multiple Choice $4. $1. $2. $8. $6.