EBK ESSENTIALS OF ECONOMICS
7th Edition
ISBN: 8220102452107
Author: Mankiw
Publisher: CENGAGE L
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Chapter 10, Problem 3QCMC
To determine
Tax and externality.
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Due to a firm generating external costs (a negative externality), the government decides to ________ the firm. In response, the firm will produce ________ units of output in order to continue maximizing profits and reach the new producer equilibrium.
Question 4Answer
a.
tax; fewer
b.
subsidize; more
c.
tax; more
d.
subsidize; fewer
When the government levies a tax on a good equalto the external cost associated with the good'sproduction, it ___ the price paid by consumersand makes the market outcome efficient.a. 1ncreases, moreb. increases, lessc. decreases, mored. decreases, less
1. An externality exists when agent A’s utility or production function depends on real variables chosen by another agent B, without an offer of compensation or other attention given to the effect of A’s well-being.
True or False
2. The "invisible hand" of the market leads to the efficient allocation of goods and services, even in the presence of externalities.
True or False
3. If there is a negative production externality, the market price of the good will be higher than the socially-optimal price.
True or False
Chapter 10 Solutions
EBK ESSENTIALS OF ECONOMICS
Ch. 10.1 - Prob. 1QQCh. 10.2 - Prob. 2QQCh. 10.3 - Prob. 3QQCh. 10 - Prob. 1QRCh. 10 - Prob. 2QRCh. 10 - Prob. 3QRCh. 10 - Prob. 4QRCh. 10 - Prob. 5QRCh. 10 - Prob. 6QRCh. 10 - Prob. 1QCMC
Ch. 10 - Prob. 2QCMCCh. 10 - Prob. 3QCMCCh. 10 - Prob. 4QCMCCh. 10 - Prob. 5QCMCCh. 10 - Prob. 6QCMCCh. 10 - Prob. 1PACh. 10 - Prob. 2PACh. 10 - Prob. 3PACh. 10 - Greater consumption of alcohol leads to more motor...Ch. 10 - Prob. 5PACh. 10 - The many identical residents of Whoville love...Ch. 10 - Prob. 7PACh. 10 - Prob. 8PACh. 10 - Prob. 9PACh. 10 - Prob. 10PA
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- Question 32 External costs are the result of the actions of fırms and consumers. fırms, consumers, and the government. O the government. fırms. O consumers.arrow_forwardAlcohol taxes that are used by government as an incentive for distillers and beer wholesalers to cut back on their alcohol sales which create external costs are called Sales taxes a. Marketable permits Ob. Subsidies C. Pigouvian taxes Od.arrow_forwardProvide examples of externalities. Question 2 of 27 Littering while hiking is an example of a externality. A firm doing research and development which can be used by other firms is an example of a OA. negative consumption; positive production B. positive consumption; negative production C. positive production; negative consumption D. negative production; positive consumption externality.arrow_forward
- Incorrect Question 24 Environmental taxes tend to be regressive because... O only income taxes can be progressive. O they impose a greater tax burden on the rich than the poor. O the poor spend a higher percentage of their income on goods with negative externalities O they decrease social welfare. they internalize externalities.arrow_forwardWhen the government levies a tax on a goodequal to the external cost associated with thegood’s production, it _________ the price paidby consumers and makes the market outcome_________ efficient.a. increases; moreb. increases; lessc. decreases; mored. decreases; lessarrow_forwardRefer to the provided supply-and-demand graph. S1 and D1 represent the current market supply and demand, respectively. S2 and D2 represent the total-cost supply and total-benefits demand. The positions of the graphs indicate that there are Multiple Choice a. external benefits from producing and consuming the product. b. external benefits from producing and external costs from consuming the product. c. external costs from producing and consuming the product. d. external costs from producing and external benefits from consuming the product.arrow_forward
- Which of the following is not an advantage of corrective taxes? Ca. They subsidize the production of goods with positive externalities. Ob. They enhance economic efficiency. Oc. They raise revenues for the government. Od. They move the allocation of resources closer to the social optimum.arrow_forwardIf a negative supply-side externality (also called a negative externality in production) occurs, then: a. The market provides the efficient allocation. b. The market under-provides the product, meaning the market allocation is less than the efficient allocation. c. The market does not provided the product, hence market failure occurs. d. The market over-provides the product, meaning the market allocation is more than the efficient allocation.arrow_forwardQuestion 29 E G H What kind of externality is depicted above? a. Positive Production Externality b. Negative Consumption Externality c. Positive Consumption Externality d. Positive Production Externality Supply MS B Demandarrow_forward
- QUESTION 38 | To internalize a positive externality: a. the consumers of a good could receive a subsidy equal to the external benefit resulting from the production or consumption of the good. b. a producer's costs could be increased by an amount equal to the external benefit resulting from the production of the good. c. consumers of the good could pay a tax equal to the external benefit resulting from the production or consumption of the good. d. Both (a) and (c) are correct O E O O O D B A с e. none of the abovearrow_forwardPlease answer the following questions.1. Explain the factors affecting Demand.2. Explain the difference between positive and negative externalities alongwith an example.3. How are public goods different from private goods?4. Explain the Law of Supply.5. With regard to demand and Supply, explain the point of MarketEquilibrium.arrow_forwardFor each of your answers to Exercise 12.2, will equilibrium price rise or fall or stay the same?arrow_forward
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