Economics of Public Issues (20th Edition) (The Pearson Series in Economics)
20th Edition
ISBN: 9780134531984
Author: Roger LeRoy Miller, Daniel K. Benjamin, Douglass C. North
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 27, Problem 4DQ
From 2004 through 201l, the federal subsidy on U.S. ethanol production was roughly 50 cents per gallon. Use the theory of rational ignorance to explain why the ethanol subsidy was only about 50 cents per gallon rather than, say, $5 per gallon.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
This problem uses the 'wedge' approach in a supply and demand diagram to show the effect of a tax.
The government is considering levying a tax of €20 per unit on either carbon emissions or car batteries. The supply curve for each of these goods is identical and is shown by S. The demand for carbon emissions is shown by D1, and the demand for car batteries is shown by D2.
Assume the government were to tax carbon emissions. The following graph shows the supply and demand for this good. The graph also shows a wedge representing the tax.
Use the tan triangle (dash symbols) to shade the area that represents the deadweight loss associated with the tax.
A local school administrator is concerned that flu outbreaks are putting children at risk, so she proposes that the state should subsidize flu shots in order to increase coverage rates.
-Are the administrator’s concerns valid—are too few children getting flu shots—and will a subsidy help?
-The school nurse suggests publishing a list of which kids did not get a flu shot, in the hope that public shaming will lead people to vaccinate their children. Is this strategy likely to work?
Current research on kidney transplants (see https://www.organdonor.gov/learn/organ-donation-statistics) shows that 17 people a day die while waiting for an organ. This is because:
Â
Of the negative externalities that prevent the government from legalizing the buying and selling of organs.
Because demand is greater than supply, reflecting the fact that people should be more willing to donate their organs.
Because the rationing role of prices is not legally allowed to work in this instance.
Because organ prices are so high, most poorer people cannot afford one.
A and D only.
Chapter 27 Solutions
Economics of Public Issues (20th Edition) (The Pearson Series in Economics)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- On the basis of the three individual demand schedules in the following table, and assuming these three people are the only ones in the society, determine (a) the market demand schedule on the assumption that the good is a private good and (b) the collective demand schedule on the assumption that the good is a public good.arrow_forwardExplain which of the following cases are classified as (A, B, C, or D) : (A) Negative Externality of Production or (B) Negative Externality of Consumption or (C) Positive Externality of Production or (D) Positive Externality of Consumption:  Almawassi village does not have a public fire department, some homeowners purchased private fire protection services to provide a positive externality to neighboring properties, which are less at risk of the protected neighbor's fire spreading to their (unprotected) house. Wakefulness due to a neighbor listening to loud music late at night. a person smoked heavily in a public place. A farmer who uses pesticides to produce vegetables A person planted ornamental trees along Salahiddeen street Creative laboratories which try to find vaccine for COVID 19 The corporate development of some free software to benefit students A software company that creates social media programs  No.  2 3 4 5 6 7 8 Answerarrow_forwardSuppose that there is an unregulated market for pesticides. When the factories produce pesticide, they also create waste that they dump into a lake on the outskirts of town. The market for pesticides is given by the following equations (note that Q is in tons, and P is in 1000s of dollars: Demand: P = 8 – Q Supply: P = Q Marginal Social Cost: P = 2 + Q Now suppose the government levies a pollution tax. What is the tax per ton of pesticide that will achieve the socially efficient outcome? If the production of pesticides at any level produces pollution, why is the socially optimal quantity not zero?arrow_forward
- Consider a public good that has 2 consumers, Dylan and Fred. Dylan’s demand for the public good is higher than Fred’s demand for the good. Show graphically and explain why the private market will provide an inefficient level of that public good.arrow_forwardPower stations emit sulfur dioxide as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of power production. Suppose the government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of sulfur dioxide). The following graph shows the daily demand for pollution rights.arrow_forwardRefer to Table 8-1 in Question 9. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally, as in Question 10. If the residents decide to build a park with size equal to the number of acres that maximizes total social surplus from the park, how much total surplus (i.e., net benefit) will Xavier receive?  (enter just the number, no $)arrow_forward
- Give an example of an externality. Explain how a tax or subsidy might be used to “correct” for the inefficiency of a market equilibrium in the presence of an externality.arrow_forwardfourth task) Education benefits society as a whole. That is why, among other things, studies at colleges and universities are subsidized: Students pay for the semester ticket, while the state covers the cost of courses, among other things. Assume that the subsidy is paid as a fixed amount per student.4a) What is the form of market failure that economically justifies the education subsidy? Briefly justify your answer. 4b) What is the effect of the subsidy and what are its welfare effects? Assume an optimally designed subsidy and give reasons for your answer. 4c) Does it make a difference whether the subsidy is earmarked and paid directly to the students or to the respective university? Give reasons for your answer.arrow_forwardProvide two examples of each of the following:  • Positive Production Externalities  • Negative Production ExternalitieS  • Positive Consumption Externalities  • Negative Consumption Externalitiesarrow_forward
- Consider a public good that has 2 consumers, Dylan and Fred. Dylan’s demand for the public good is higher than Fred’s demand for the good. Show graphically and explain why the private market will provide an inefficient level of that public good. Please Help!!!!!!!!arrow_forwardSuppose the Environmental Protection Agency (EPA) wants to mandate that all methane emissions must be reduced to zero in order to alleviate global warming in the United States. Which of the following describes why most economists would disagree with this policy?  Reducing methane emissions is desirable, but whatever levels of pollution firms decide to emit privately are already efficient.   Society would not benefit from lower air pollution.   The environment isn’t worth protecting.   The opportunity cost of zero pollution is much higher than its benefit.arrow_forwardSuppose the government imposes a tax of 20% on automobile production for cars that use fossil fuels, and scientists estimate that the environmental cost of these automobiles is about 10%, please show in a demand and supply framework how this tax is going to increase or reduce social welfare?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...
Economics
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Environmental Law: The Clean Air Act; Author: LawShelf;https://www.youtube.com/watch?v=1-SH3kJpVA4;License: Standard Youtube License