Study Guide for Mankiw's Principles of Microeconomics, 7th
7th Edition
ISBN: 9781285864242
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 11, Problem 3PA
Sub part (a):
To determine
The free rider problem.
Sub part (b):
To determine
The free rider problem.
Sub part (c):
To determine
The free rider problem.
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Mr. Saeed Ahmed loves watching sports channel on his local public TV station, but he never sends any money to support the station during its fund-raising drives.
What name do economists have for people like Mr. Saeed Ahmed?
b. How can the government solve the problem caused by people like Mr. Saeed Ahmed?
c. Can you think of ways the private market can solve this problem? How does the existence of cable TV alter the situation?
What is an externality?
How do they affect market efficiency?
If an externality is present, where is the socially optimal point of production? Where will the market produce if there is no government intervention? How do we get from the private market equilibrium to the socially optimal one?
Identify the characteristics of a public good.
a. Why do public goods exist?
b. What is the problem that comes about due to public goods?
c. Which of the following are public goods: parks, police services, welfare payments to the poor, production of energy, space exploration?
d. Briefly describe how the free rider problem can be overcome.
e. Briefly explain why markets often have a difficult time producing public goods.
Chapter 11 Solutions
Study Guide for Mankiw's Principles of Microeconomics, 7th
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- A policymaker argues that if the roads were privately owned, then the externality of traffic congestion would be fully internalized and solved by the market. Discuss this by first explaining the externality problem that leads to congestion, and then explain whether the private market would deliver the efficient level of roads.arrow_forwardHow externalities and their impact the economy? explain the negative and the positive externalities and how it affects the market.arrow_forwardThe south African government develops targets that pertain to healthcare and education. Which of the following statements explains why government provides these two goods? A. The benefit to society of healthcare and education is extremely low. B. The benefits that society receives from health care and education exceed those that accrue to an individual user. C . The government spends money on health care and education because they are public goods D. Health care and education only produce negative externalities.arrow_forward
- What is the concept of a negative externality in economics? A. A benefit received by individuals who did not incur the cost B. A cost incurred by individuals who did not receive the benefit C. A situation where external parties receive equal benefits and costs D. A situation where the government intervenes in the marketarrow_forwardIs the following good a private good, a public good, a common resource, or a club good? Explain why the good is rival or non-rival and excludable or non-excludable. An oil pipelinearrow_forwardOffer an example of a good that has become a public (or quasi-public) good due to technology. Explain how technology has made this good non-rival in consumption or non-excludable. Is there a free rider problem with the good you mentioned? How can the free rider problem be addressed in this example?arrow_forward
- What happens to the private benefit curve and the private cost curve?arrow_forward#3. When pollution (a negative externality) is created by firms, which of the following is NOT a valid way for the government to restore the social optimum? a. require firms to install pollution-abatement equipment b. require firms to change production techniques to reduce emissions c. levy a tax on the production of the good d. require firms to pay for the environmental damage they create e. offer a subsidy to firms to reduce their production costsarrow_forward#8. A party ends up spreading the coronavirus. Is that an externality? a. Yes, it is a negative externality b. Yes, it is a positive externality c. No, it is not an externalityarrow_forward
- Compare and contrast private and public goods. Give an example for each kind of good.arrow_forwarda. How would the owner respond to the negative externality caused by smokers? b. Suppose smokers own the airspace. How would that change matters? c. If the government gives ownership of the air to nonsmokers, would that change matters? Explain your answer. d. What does a ban on smoking in the restaurant do?arrow_forwardWhy is a football game on ESPN a quasi-public good but a game on the NBC, CBS, or ABC is a public good?arrow_forward
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