1 Question 41What are payoffs of the farmers in the Nash equilibrium outcome of this scenario?Both farmers earn a profit of $7.Both farmers earn a profit of $4.) The answer is uncertain because there are multiple Nash equilibria.Both farmers earn a profit of $2.Question 42,If the farmers acted cooperatively by choosing the intensity that maximizes theirjoint payoff, what would their total profit be?$12$20$14$22Question 43,Rules and regulations that limit the actions of rational individuals can never makethem better off because they would otherwise choose the best outcomes forthemselves.TrueFalse Example 2: Agricultural irrigationQuestions 41-43 relate to the following information. Suppose that groundwater isused for irrigation in a rural area. Overuse of groundwater can reduce the level of thewater table, making it more costly for all farmers to extract water. For simplicity,suppose that water can be used at two intensities --- high and low --- and that thereare only two farmers. The revenue from crop production for each farmer increaseswith the intensity of groundwater usage: it is $23 for high intensity and $15 for lowintensity. The cost of extracting the water depends on whether the other farmer'sintensity is high or low. The extraction cost for each farmer is $4 for low intensityand $11 for high intensity, if the other farmer is a low intensity user. However, itrises by $5 in each case if the other farmer is a high intensity user.

High Farmer 2 Low Farmer 2 High Farmer 1 23- 16 , 23-16 23-11, 15- 9 Low Farmer 1 15- 9 ,…

What are payoffs of the farmers in the Nash equilibrium outcome of this scenario Both farmers earn a profit of $7. Both farmers earn a profit of $4. The answer is uncertain because there are multiple Nash equilibria. ) Both farmers earn a profit of $2. Question 42, If the farmers acted cooperatively by choosing the intensity that maximizes their joint payoff, what would their total profit be? $12 O $20 O$14 $22 Question 43, Rules and regulations that limit the actions of rational individuals can never make them better off because they would otherwise choose the best outcomes for themselves. True False

What are payoffs of the farmers in the Nash equilibrium outcome of this scenario Both farmers earn a profit of $7. Both farmers earn a profit of $4. The answer is uncertain because there are multiple Nash equilibria. ) Both farmers earn a profit of $2. Question 42, If the farmers acted cooperatively by choosing the intensity that maximizes their joint payoff, what would their total profit be? $12 O $20 O$14 $22 Question 43, Rules and regulations that limit the actions of rational individuals can never make them better off because they would otherwise choose the best outcomes for themselves. True False

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter17: Externalities And The Environment

Section: Chapter Questions

Problem 2.3P: (Negative Externalities) Suppose you wish to reduce a negative externality by imposing a tax on the...

See similar textbooks

Similar questions

(Negative Externalities) Suppose you wish to reduce a negative externality by imposing a tax on the activity that creates that externality. When the amount of the externality produced per unit of output increases as output increases, the correct tax can be determined by using a demand-supply diagram; show this. Assume that the marginal private cost curve slopes upward. Negative Externalities: The Market for Electricity in the Midwest:
Suppose that Sonys R. Is this a private or social benefit?
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.
Consider two ways of protecting elephants from poachers in African countries. In one approach, the government sets up enormous national parks that have sufficient habitat for elephants to thrive and forbids all local people to enter the parks or to injure either the elephants or their habitat in any way. In a second approach, the government sets up national parks and designates 10 villages around the edges of the park as official tourist centers that become places where tourists can stay and bases for guided tours inside the national park. Consider the different incentives of local villagers-who often are very poor-in each of these plans. Which plan seems more likely to help the elephant population?
6. Consider the allocation of surface water between two types of users. The marginal net benefits are MNB, (q) =12-q, for one type and MNB, (q₂)=6-q, for the other type, where g, and q denote the quantity of water used by each type in suitable units and MNB denotes marginal net benefits in dollars per unit. a. Determine the aggregate marginal net benefit. b. Suppose there are q, 8 units of water available in a given year. Determine the efficient allocation of water to the two types. c. Suppose there are q, 4 units of water available in a given year. Determine the efficient allocation of water to the two types. d. Draw a clearly labeled graph illustrating the efficient allocation of water in parts b and c.
If Compressed Natural Gas (CNG) powers vehicles and is an almost pollution-free fuel. If factory equipped, vehicles can switch between using either CNG or ordinary gasoline. It costs under $4000 extra to buy such a factory-equipped auto. However, the auto industry makes little effort to promote the use of CNG. Instead, the auto industry is rushing to introduce battery-powered autos that use expensive, heavy and dangerous Lithium Ion batteries. Suppose the government sufficiently subsidized the installation of CNG pumps at public service stations. QUESION: Would the effect on demand for CNG powered autos INCREASE OR DECREASE?
2.- Assume that consumers are uniformly distributed along a one-mile stretch of a beach. N ice cream vendors are pondering where to position their carts. The price that they are allowed to charge is fixed by the EACAC (Equal Access to Coolness for All Coalition). (Also, each consumer will buy exactly one ice cream.) (a) Show that there is no equilibrium (in locations) if N=3. (b) Suppose N=5 and vendors position their cart each at one of the (mile) points ( 1/6, 2/6, 3/6, 4/6, 5/6 ) is that an equilibrium?
17-1 Describe the common-pool problem and summarize ways to address it1. (Externalities) Complete each of the following sentences: a. Resources for which periodic use can be continued indefinitely are known as ____________ resources.b. Resources that are available only in a fixed amount are ____________ resources.c. The possibility that an open-access resource is used until the net marginal value of additional use equals zero is known as the ____________.
Refer to Fig. 7.4 and Example 7.4 - 'The Effect of Effluent Fees on Input Choices'.How should the manager of a steel plant respond to an EPA-imposed effluent fee of $10 per gallon of wastewater dumped in the river?
4. Assume that we have the following information about a firm that conducts scientific research: The total cost of producing q units of research is 1.5q^2. The firm believes that when it produces q units of research, it receives a benefit of 120q-q^2. The total external benefit to society of each unit of the firm's research is valued at q^2 (not including the benefit the firm receives). (a) Draw a graph that shows the marginal private cost, marginal private benefit, marginal social cost and marginal social benefit generated by this firm. How many units of research will the firm produce if there is no outside interference? (b) What is the socially optimal amount of research? (c) Suggest a tax or subsidy that would induce the firm to produce the socially optimal amount of research, then show that this tax does indeed cause the firm to produce the socially optimal amount of research.
Figure 3 shows the abatement cost curves of a high-cost side of an industry (MC1) and the low-cost side of the industry (MC2). Abatement runs from left to right; emissions from right to left, as shown. Given this information, answer the following questions: 1. Suppose now that a tradable permit system is imposed in which es permits are given to each firm, and the permits can be traded. Trades are conducted and the permit price settles at the “Market Price of Permits”.What is the amount of pollution the high-cost (MC1) side of the industry abates in the new equilibrium after trading (is it as, al, 0, or ah)? 2. What is the amount of pollution the low-cost (MC2) side of the industry abates in the new equilibrium after trading? Is it al, 0, as, or ah? 3. What is the cost savings from trading for the high-cost (MC1) side of the industry? Is it K, F+G+H+I, H+I+K, or F+G+K? 4. What is the amount paid for permits for the high-cost (MC1) side of the industry? Is it F+G+H+I, G+H+K, G+H+I or…
1a) Water filtration removes contaminants that increase the risk of plant diseases from a farmer's water sources. As a result, there is a decreased risk of consumers suffering illnesses from consuming crops grown with filtered water. Due to this, economists might suggest that the use of water filtration systems in agriculture has an associated ________ externality? 1b) Draw the private cost, private benefit, social cost, and social benefit curves in the market for water filtration systems. If any of the curves are the same, label the curve as both. 1c) Is there market failure if the market runs freely? If so, is the socially optimal quantity of farmers using water filtration systems higher or lower than the market outcome? 1d) Provide a policy suggestion that would help to correct any market failures that arise due to this externality. Explain why this would be effective. 2a) Livestock and poultry farming are some of the largest contributors of ammonia emissions. Ammonia has been…