Suppose that the following graph shows a free market equilibrium, with QE as the equilibrium quantity. Supply Demand QUANTITY For an output level exactly at 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 is able to dump toxic chemicals into a river next to its factory, which poisons wildlife and harms the health of nearby residents who have no business with the company. This scenario is characterized by , which is an example of PRICE

Suppose that the following graph shows a free market equilibrium, with QE as the equilibrium quantity. Supply Demand QUANTITY For an output level exactly at 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 is able to dump toxic chemicals into a river next to its factory, which poisons wildlife and harms the health of nearby residents who have no business with the company. This scenario is characterized by , which is an example of PRICE

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter8: Market Failure

Section: Chapter Questions

Problem 2P: Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and...

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B. Let’s consider the market for flour in a different town. Assume that it is efficient (i.e. that there are not external costs to producing flour, and no external benefits from consuming it). Price ($/lb) Quantity Supplied (thousands of lbs per day) Quantity Demanded (thousands of lbs per day) 1.5 8 14 2 9 13 2.5 10 12 3 11 11 3.5 12 10 4 13 9 What is the price and quantity of flour sold without government intervention. Graph this equilibrium. XXXX 2. Suppose that, alarmed by the inability of many poorer consumers to buy flour, the government institutes a $2/lb price ceiling. How much flour will suppliers wish to sell, and how much will buyers demand? How much flour will actually be sold? Show this outcome on the same graph you drew for question 1. XXXX 3. Describe, in one sentence each, three problems that this policy might create? Please do not simply copy down phrases from the textbook, but instead describe ways that…
The Chief Medical Officer has advised the government that consumption of widget-corn improves the survival rate of COVID-19 by 20%. Supposethe supply and demand functions for widget-corn are:QD = 100 – 5P (1)QS = 5P. (2) P is the price in dollar and Q is the quantity in kilograms.a. Determine the market equilibrium price and quantity of widget-corn? b. Calculate the consumer surplus, producer surplus, and total economic surplus at the market equilibrium. c. Having confirmed the positive impact of widget-corn consumption on COVID-19 patients, the government has ordered widget-cornsellers to charge $5 per kilogram.(i) What type of price regulation policy is this? Briefly explain. (ii) Calculate the impact of the policy on the quantity of widget-corn supplied and demanded. (iii) Explain the impact of the policy consumer surplus, producer surplus, and total economic surplus. (iv) Is the outcome of the government’s policy efficient and, therefore, maintained or abandoned? Explain in detail.…
This question is inspired on the recent evolution of electricity markets in Switzerland and the EU.Suppose a market consists of three producers:i. Firm 1 (photovoltaics) has a marginal cost of production od CHF 1 and can produce up to 100 MW/h;ii. Firm 2 (hydroelectric) has a marginal cost od production of CHF 5 and can produce up to 200 MW/H;iii. Firm 3 (gas) has a marginal cost od production of CHF 20 and can produce up to 200 MW/h.For simplicity, assume that there are no fixed costs of production.Consumers are willing to pay a constant amount of 25 CHF for each additional MW/h up to 500 MW/h. a) Draw a graph of supply and demand for this market.b) Calculate the price in the market and the profits of each company.
Suppose that the demand for a concert is represented by the following equation, where P is the price of concert tickets and QD is the quantity of tickets demanded:QD = 2200 - 24PThe supply of tickets is represented by the equation where P is the price of the tickets and QS is the quantity of tickets supplied:QS = -500 +79PGive all answers to two decimals. 1. Find the equilibrium price and quantity of tickets sold. 2. Calculate the consumer surplus and producer surplus at the equilibrium price and quantity. Use the formula for the area of a triangle, (½ × base × height), to calculate each value.
The following Table refers to four buyers’ willingness to pay for papadums. Each buyeris willing to buy at most one papadum and no more. buyer Willingness to pay ($) for onepapadum Lincoln 17.00 Jefferson 15.00 Franklin 9.00 Washington 3.00 (a) Let the competitive market price be $4.00: calculate the total consumer surplusin the market at this price.(b) Assume now that there is only a single seller of papadums, and she knows eachbuyer’s willingness to pay. Assume that this seller incurs a cost of $4.00 perunit of papadum produced (i.e., the marginal cost is constant). If she intends tomaximise profits, how many papadums would this seller supply to the market,and what price would she charge? Remember, the price has to be the same foreach unit sold. Hint: start at a price of $17 and calculate what profit would be.Then lower the price just enough to attract an additional buyer and calculatewhat the new profit would be. Repeat this until all four buyers are purchasingthe…
Assume an increase in the price from the EQUILIBRIUM PRICE as established in # 1 above, SHOW GEOMETRICALLY (using a graph) the effect of such an increase in Price ABOVE THE EQUILIBRIUM point. What “economic problem” is created in the market. Measure geometrically the magnitude or distance of such “economic problem”. In the face of such an economic problem, where private sector buyers and suppliers could not do anything more (and considering the PERISHABILITY OF THE VEGETABLE PRODUCT), which economic actor should come to intervene properly? Discuss what should that intervener do amidst such economic problem faced by the microeconomic actors -- the buyers and the sellers.
Write down a model of positive production externality with two firms, in which theproduction activities of one firm directly affects the production/cost of the other firm.State and explain the key assumptions of the model. Using the model, answer thefollowing questions:(a) Explain why the presence of a positive production externality could prevent therealisation of an efficient outcome.(b) Name a possible cure for the positive production externality and explain how itcould solve the inefficiency problem.
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?
Why would a free market never operate at aquantity greater than the equilibrium quantity? Hint:What would be required for a transaction to occur at thatquantity?
I would like to know just part d,e, and f. Thank you Suppose that the supply of tomato soup in a city is represented byQS = 100P – 10PT − 50where P is the price of tomato soup and PT is price of tomato needed to produce tomato soup. All prices are indollars and quantity is in liters.Assume that the current tomato price is $15.Suppose that the demand for the tomato soup is QD = 1000−60P + 0.3Iwhere P is the price of the tomato soup and I is a representative household’s income.Assume that at the equilibrium, income is $12000.a) What are the current equilibrium price and quantity of the tomato soup? Show the equilibrium on a detailedgraph.b) Suppose that income decreases to $10400. What is the new equation for the demand for tomato soup? Doesthis correspond to an increase or decrease in the demand for tomato soup? Show the effect of this event onthe equilibrium and the diagram you used in part (a)c) Start from the equilibrium in part a) and now suppose that the price of the tomato…
The Chief Medical Officer has advised the government that consumption of widget-corn improves the survival rate of COVID-19 by 20%. Suppose the supply and demand functions for widget-corn are:QD = 100 – 5P (1)QS = 5P. (2)P is the price in dollar and Q is the quantity in kilograms.a. Determine the market equilibrium price and quantity of widget-corn? Calculate the consumer surplus, producer surplus, and total economic surplus at the market equilibrium. Having confirmed the positive impact of widget-corn consumption on COVID-19 patients, the government has ordered widget-corn sellers to charge $5 per kilogram.(i) What type of price regulation policy is this? Briefly explain. (ii) Calculate the impact of the policy on the quantity of widget-corn supplied and demanded. (iii) Explain the impact of the policy consumer surplus, producer surplus, and total economic surplus. (iv) Is the outcome of the government’s policy efficient and, therefore, maintained or abandoned? Explain in detail. d.…
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.