Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then Select one: O a. the equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked. O b. the equilibrium quantity of cigarettes smoked will equal the socially optimal quantity of cigarettes smoked. O c. the equilibrium quantity of cigarettes smoked will be less than the socially optimal quantity of cigarettes smoked. O d. There is not enough information to answer the question.

Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then Select one: O a. the equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked. O b. the equilibrium quantity of cigarettes smoked will equal the socially optimal quantity of cigarettes smoked. O c. the equilibrium quantity of cigarettes smoked will be less than the socially optimal quantity of cigarettes smoked. O d. There is not enough information to answer the question.

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 7PA

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Q.1 in case of positive externality, the rule for the Social welfare Maximization. Select one: O.a. None of these options O.b. MB MC O.C. MB-MSC O.d. MSB MC Clear my choice Q. 2 Market mechanisms are unlikely to provide Select one: O.a. None of these options O.b. nonrival goods efficiently. O.c. Supply and Demand O.d. prices. Q. 3 When it will be difficult to reach o privote solution for m Solect one Oa externolitios invisible b transoctions costs low c transoctions costs high dexteholities viiblee CleaLmY cbaice
(a) Explain the difference between a positive externality and a negative externality and why each result in an equilibrium point that is not optimal for society. (b) which externality results in an equilibrium quantity that is higher than the optimal social quantity of a good? (c) how can the impact of the externality in part b be corrected?
1. Give an example of a positive externality and an example of a negative externality. Be sure to explain for each. 2. In a market without environmental regulations, will the supply curve for a firm take into account private costs, external costs, both, or neither? Explain. 3. Would environmentalists favor command-and-control policies as a way to reduce pollution? Why or why not? Explain.
Suppose that we are considering the market for electric cars The private demand for cars is given buy: ? = 160 − 2? And the private supply of electric cars is given by: ? = ? − 20Suppose also that electric cars produce a positive externality, with a Marginal Economic Benefit of $20 per unit. 1. What would be the private market equilibrium (p* & Q*)? 2. What is the socially optimal equilibrium (p* & Q*)? 3. What is Producer Surplus and Consumer Surplus in the private market equilibrium? 4. What is the increase in Total Surplus from moving from the private market equilibrium to the socially optimal equilibrium?
For a product with external benefits like vaccines (positive externality),which of the following is true?Select one: Oa. The market equilibrium results in too much of the good compared to what is optimalOb. The market equilibrium results in too little of the good compared to what is optimal.Oc. The market will not provide the good; it must be publicly funded.O d. Large economies of scale work as a barrier to firm entry.
What is an external benefit? An external benefit is a benefit that OA. always equals external cost OB. experiences increasing marginal returns C. affects someone other than the buyer of a good OD. is greatest at the equilibrium point
Suppose that we are considering the market for windmills. The private demand for electric cars is given buy: ?d = 160 − 2? And the private supply of electric cars is given by: ?s = ? − 20Suppose also that electrci cars produce a positive externality, with a Marginal Economic Benefit of $30 per unit. 5. What would be the private market equilibrium (p* & Q*)? 6. What is the socially optimal equilibrium (p* & Q*)? 7. What is Producer Surplus and Consumer Surplus in the private market equilibrium? 8. What is the increase in Total Surplus from moving from the private market equilibrium to the socially optimal equilibrium?
a. Suppose a market is introduced for the externality Eveline causes on Victor. Let us denote by px the price of this externality. Suppose "property rights" are assigned such that Victor has the right not to experience the smell of cooked cabbage. The competitive equilibrium price ratios pm and Px are equal to? b. Derive the market allocation corresponding to the new competitive equilibrium of the economy formed by Eveline and Victor (ce, me) and (cv,mv). c. Is the new competitive equilibrium Pareto efficient?
3. Consider the production and sale of Good C. There are NO externalities associated with the production or consumption of Good C. Assume that Good C is sold in a competitive market. Thus, you can assume that the S Curve = Cost Curve, and that the D Curve = WTP Curve. You are told that the following points are on the Demand and Supply schedules( and thus also are points on the Demand and Supply Curves) for Good C: Price Qty. Demanded Qty. Supplied $ 3000 28 58 $ 2750 30 55 $ 2500 32 52 $ 2250 34 49 $ 2000 36 46 $ 1500 40 40 $ 1000 44 34 $…
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Suppose demand is QD =12 - P supply is QS = 2P. There is a constant positive externality of $6 per unit (Marginal External Benefit, MEB = $6). What subsidy would achieve the efficient allocation? In other words, what subsidy would maximize social surplus? (Do not overthink this one.) Find quantity given this subsidy. What is the social benefit that accrues due to the quantity in the previous part? (Hint: It is MEB times the quantity.) Find (private) producer surplus given this subsidy. Find (private) consumer surplus given this subsidy. How much would this subsidy cost the government? In other words, find government “revenue” (which will end up being a negative number). Add up the answers to the previous four questions to find social surplus. (It should be the same as the area between MSB and MSC.)
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