Question 1 A global-positioning anti-theft device installed by one car owner can produce a positive spillover to other citizens in a community. Discuss the impact on the: (i) Private benefit curve (ii) Social benefit curve (iii) Private cost curve (iv) Social cost curve (v) Market equilibrium level of output (vi) Efficient level of output
Question 1
A global-positioning anti-theft device installed by one car owner can produce a positive spillover to other citizens in a community. Discuss the impact on the:
(i) Private benefit curve
(ii) Social benefit curve
(iii) Private cost curve
(iv)
(v)
(vi) Efficient level of output
Question 2
(a) Identify the type of market failure, explain why it occurs and provide a solution
(i) An auto repair shop convinces you that you need a $20,000 valve job when all you need is an oil change.
(ii) Everyone in the neighbourhood would benefit if an empty lot were turned into a park but no entrepreneur will come forward to finance the transformation
(iii) A barking dog in the backyard
(b) Define the tragedy of the commons in your own words.
(c) Why are fish in the ocean an example of a resource that suffers from the tragedy of the commons but cattle grazing in a farmer’s pasture does not suffer from the tragedy of the commons?
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