Use figure 1, which illustrates the market for butane to answer the following three questions. Butanehas a private marginal cost of 10 + 5q but each gallon of butane also causes $30 of environmentaldamage.553925GMSocial MC =Private MC + 30.T51015Private MC 5+2Q20Inverse Demand = 90-3Q2530Figure 1: Market for Butane1. What areas depict the deadweight loss that would result from a perfectly competitive marketfor butane with no environmental regulation imposed on producers.

Deadweight Loss- It is a loss occurring as a result of market inefficiency. It is a situation when…

Answered: Use figure 1, which illustrates the…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 2PA

See similar textbooks

Similar questions

Assume that the marginal private costs of a film producing fuel-efficient can; is greater than the marginal social costs. Assume that the marginal private benefits of a firm producing fuel efficient cars are the same as the marginal social benefits. Discuss one wags.r that the government cans ï¬‚y to increase production and sales of fuel efficient cars to the socially desirable amount. Hint: the government is flying to affect production through costs, net benefits.
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.
Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?
Identify the following situations as an example of a negative or a positive externality: You are a birder (bird watcher), and your neighbor has put up several birdhouses in the yard as well as planting trees and flowers that attract birds. Your neighbor paints his house a hideous color. Investments in private education raise your countrys standard of living. Trash dumped upstream flows downstream right past your home. Your roommate is a smoker, but you are a nonsmoker.
Firms in a polluting industry can be classified in two groups: newer firms with a cleaner technology that can abate pollution at a lower marginal cost MCLA = (1/2)aL and older firms with dirtier MCHA = aH, where ai is the level of abatement undertaken by firms of type i = L, H. The social marginal benefit of abating pollution from this particular industry is MBA = 120 - A, where A is the aggregate level of abatement in that industry. Suppose instead that the government uniformly allocates tradable emissionís permits. What abatement allocation will prevail after the permits are traded among firms? Is this allocation efficient?
3. Jonny, Ken, and Lenny each value fire protection differently. Jonny’s demand for the public good is Q = 210 − 30P, Bill’s demand is Q = 210 − 15P, and Coco’s demand is Q = 132 − 12P. If the marginal cost of providing fire protection is $30.00. a. What is the socially optimal level of fire protection provision? b. Under Lindahl pricing, what share of the tax burden would each of the three people pay?
Suppose there are two individuals, Bob and Linda, who have demand curves for good X characterized by the equation P= 6-2QandP= 6-Q. Assume that the good is produced competitively, and that the marginal cost of production (Supply) is given by P= 2Q. a) Assume that good X is a private good. What is the market demand (i.e. marginal social benefit) for good X? Solve for the market equilibrium price and quantity. Depict graphically. b) If good X is a public good, what is the market demand (i.e. marginal social benefit) for good X? Solve for the efficient price and quantity. Depict graphically. c) Comment on why your answers in parts a and b are different.
Consider two ways to protect your car from theft.The Club (a steering wheel lock) makes it difficult fora car thief to take your car. Lojack (a tracking system)makes it easier for the police to catch the car thiefwho has stolen it. Which of these methods confersa negative externality on other car owners? Whichconfers a positive externality? Do you think there areany policy implications of your analysis?

Recommended textbooks for you

Essentials of Economics (MindTap Course List)

Economics

ISBN:

9781337091992

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Principles of Microeconomics

Economics

ISBN:

9781305156050

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Principles of Economics, 7th Edition (MindTap Cou…

Economics

ISBN:

9781285165875

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Essentials of Economics (MindTap Course List)

Economics

ISBN:

9781337091992

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Principles of Microeconomics

Economics

ISBN:

9781305156050

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Principles of Economics, 7th Edition (MindTap Cou…

Economics

ISBN:

9781285165875

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Principles of Microeconomics (MindTap Course List)

Economics

ISBN:

9781305971493

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Microeconomic Theory

Economics

ISBN:

9781337517942

Author:

NICHOLSON

Publisher:

Cengage

SEE MORE TEXTBOOKS