Bundle: Microeconomics, 13th + Aplia, 1 Term Printed Access Card
13th Edition
ISBN: 9781337742535
Author: Roger A. Arnold
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 2WNG
(a)
To determine
Graphical illustration of a corrective tax that achieves the socially optimal output.
(b)
To determine
Graphical illustration of a corrective tax that moves the market output farther away from the socially optimal output.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Q) The demand for bags of cement is Qd=1500-10p, supply is Qs=20, a tax of $5 per bag exists. A government project requires the purchases of 150 bags of cement.
What is the social opportunity cost of 150 bags of cement purchased for the project? use a diagram to explain.
Use the graph below to answer the following questions?
MC
M
Social Demand
Private Demand
V
Quantity (units/day)
What is the socially optimal price for this market? [ Select]
What is the socially optimal quantity for this market? [Select]
What price will be the equilibrium price in this market? [Select ]
What quantity will be the equilibrium quantity in this market? [Select]
How can the government achieve the socially optimal quantity in equilibrium?
[ Select ]
Price ($/unit)
Use the graph attached below as a starting point (either download it or print it out). Add curves, labels, etc. to this graph in order to show the following:
1. Show that this good has a $4/unit negative externality (external cost), such as pollution.
2. Shade the area that represents the Deadweight Loss (lost gains from trade) caused by the external cost.
3. Show a tax or subsidy wedge (whichever you think is appropriate) that will solve the problem of the external cost.
4. Show the socially optimal level of production that the Pigouvian tax or subsidy above will help the market to achieve.
You may use software or pencil and paper to complete this graph. Upload it here when you are done.
Chapter 17 Solutions
Bundle: Microeconomics, 13th + Aplia, 1 Term Printed Access Card
Ch. 17.1 - Prob. 1STCh. 17.1 - Prob. 2STCh. 17.2 - Prob. 1STCh. 17.2 - Prob. 2STCh. 17.2 - Prob. 3STCh. 17.2 - Prob. 4STCh. 17.3 - Prob. 1STCh. 17.3 - Prob. 2STCh. 17.3 - Prob. 3STCh. 17.4 - Prob. 1ST
Ch. 17.4 - Prob. 2STCh. 17.4 - Prob. 3STCh. 17.5 - Prob. 1STCh. 17.5 - Prob. 2STCh. 17.5 - Prob. 3STCh. 17 - Prob. 1QPCh. 17 - Prob. 2QPCh. 17 - Prob. 3QPCh. 17 - Prob. 4QPCh. 17 - Prob. 5QPCh. 17 - Prob. 6QPCh. 17 - Prob. 7QPCh. 17 - Prob. 8QPCh. 17 - Prob. 9QPCh. 17 - Prob. 10QPCh. 17 - Prob. 11QPCh. 17 - Prob. 12QPCh. 17 - Economists sometimes shock noneconomists by...Ch. 17 - Prob. 14QPCh. 17 - Prob. 15QPCh. 17 - Prob. 1WNGCh. 17 - Prob. 2WNGCh. 17 - Prob. 3WNG
Knowledge Booster
Similar questions
- Use the attached image to answer the next three questions.  What price and quantity will the firm in the diagram above produce? What’s the socially-optimal price and quantity? In the absence of government intervention, will this firm produce too much or too little?arrow_forwardConcept Question 5.11 The federal government often aids farmers through systems of price supports. Suppose that the government sets a price support of $6 per pound in the rice market. The graph on the right shows this situation. 10- The price of rice would be $ 5 per pound if there was no price support. In order to maintain the price support, the government will have to purchase 200 pounds of rice. 8- The cost of this program to the government is S $5 4- 2- D 300 400 500 Quantity of rice Price of ricearrow_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_forward
- Soybeans are produced and sold in a perfectly competitive market. The fertilizers used in soybean production generate a negative externality by seeping liquid contaminants into local rivers. (a) Draw a correctly labeled graph of the soybean market, and show each of the following. (i) The marginal private cost, labeled MPC (ii) The marginal social cost, labeled MSC (iii) The marginal social benefit, labeled MSB (iv) The market equilibrium quantity, labeled QC (v) The socially optimal quantity, labeled QS (vi) The area of the deadweight loss, shaded completely (b) Assume the government sets a binding price floor such that the quantity demanded in the market is between QS and QC. (i) What will happen to the quantity produced? (ii) Will the price floor reduce the deadweight loss? Explain. (c) Assume instead of a price floor, the government decides to impose a lump-sum tax. What will happen to the socially optimal quantity? Explain. (d) Assume instead of a lump-sum tax, the government…arrow_forwardIdentify at least one positive and negative externality from running a hamburger shop. What is one example of how an externality could affect the price of your hamburger?arrow_forwardIf a positive demand-side externality (also called a positive externality in consumption) 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_forward
- On the attached graph: 1. Illustrate the marginal social benefit curve 2. Illustrate the area of deadweight loss 3. Identify the market Q and the socially optimal Qarrow_forwardWhich of the following represents a social benefit? Group of answer choices The satisfaction of eating a strawberry ice cream. The total revenue a company gains from developing a new vaccine. All of the positive externalities from the invention of the laser All of the positive externalities a company receives from the implementation of a new technology that decreases the cost of production.arrow_forwardWith the existence of negative externality, determine the socially efficient level of output and price. When negative externality exists, the firms loose profits. Calculate the size of the firms’ loss.) On the other hand, the community’s gain from the social efficient allocation level. Interpret the results. Determine the net gain (or loss) to the society.arrow_forward
- With the help of appropriate diagrams, explain how a tax can be used to reduce the consumption of a harmful product such as cigarettes.arrow_forwardSuppose there are two residents in a neighborhood, and you know both of their demand curves for a public good. What would you have to do in order to figure out what the social demand curve? A.Multiply the two demand curves together  B.Add their demand curves together  C.Subtract the demand of the person with the lower valuation of the public good from the demand of the person with the higher valuation of the public good  D.Subtract the demand of the person with the higher valuation of the public good from the demand of the person with the lower valuation of the public goodarrow_forwardConsider a small town with a factory that produces cell phones. The factory's production causes air pollution, which affects the health of the residents. Draw a graph representing the market for cell phones in this town. Label the socially optimal level of output and the market equilibrium level of output. Explain the difference between the two levels.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning