Principles of Microeconomics
8th Edition
ISBN: 9781337676670
Author: N. Gregory Mankiw
Publisher: Cengage Learning US
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Question
Chapter 11, Problem 7PA
Subpart (a):
To determine
Cost benefit analysis.
Subpart (b):
To determine
Cost benefit analysis.
Subpart (c):
To determine
Cost benefit analysis.
Subpart (d):
To determine
Cost benefit analysis.
Subpart (e):
To determine
Cost benefit analysis.
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Please solve part d,e and f!!!
Three roommates, Jim, Saleem, and Ritesh, are thinking about buying a new speaker system for their apartment. The speaker system would be a public good if they buy them, and the total cost would be $300 which would be shared equally among the three. Jim values it at $80, Saleem values it at $140, and Ritesh values it at $70. If the speakers are purchased each person gets a payoff equal to their net valuation (valuation minus cost share); if they are not purchased each gets zero payoff.
a)Is it socially efficient that they buy the speaker system? With reference to the definition of a public good, why or why not?
The roommates decide that they will write down their net valuations, and if these reports sum to more than zero, they will buy the TV (sharing the cost equally), or else they will not.
b) If all were to report their true valuations, what payoff would each agent earn?
c) Show that if Jim and Ritesh submit their true net valuation, then Saleem does…
a. When a firm imposes an external social cost (negative externality), the government should impose a tax on production equal to the externality cost to ensure that the market will achieve the socially optimal outcome.
Select one:
True
False
b. The socially optimal level of emissions of most pollutants is zero.
Select one:
True
False
c. Externalities are only inefficient when they impose a cost. They are not inefficient when they bestow a benefit.
Select one:
True
False
What is the concept of a negative externality in economics? A. A benefit received by individuals who did not incur the cost B. A cost incurred by individuals who did not receive the benefit C. A situation where external parties receive equal benefits and costs D. A situation where the government intervenes in the market
Chapter 11 Solutions
Principles of Microeconomics
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Similar questions
- Problem 1: Externality The weekly supply and demand for packs of cigarettes in the United States is given in the figure below. Suppose cigarette smoking causes an external cost on nonsmokers, as shown by the social benefit curve on the graph. Price ($) 36 34 32 30 - 28 26 - 24 22 - EMC S SEMC pvt 20 - 18- 16 - 14 - 12 - 10- 8 MB pvt social 2 MB 10 12 14 16 18 20 22 24 26 28 30 32 Pack of cigarettes (millions) a. This is a [ Select ] [ Select ] externality.arrow_forwardAn externality is the impact of: a. None of the answers is correct. b. one person’s actions on the well-being of another person c. a person’s actions on his well-being.arrow_forwardConsider a market with a positive externality. The market will tend to.... the good because the market participants tend to ignore the.... of their decision. A. underproduce; external social benefit B. overproduce; external social benefit C. underproduce; private benefit D. overproduce; private benefit Explain why.arrow_forward
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