Explain when
Explanation of Solution
When the marginal external cost (MEC) is zero, the marginal
Marginal social benefit (MSB): Marginal social benefit (MSB) is a high utility or satisfaction felt by an individual when they purchase an additional unit of a good or service.
Marginal social cost (MSC): Marginal social cost is the added cost spent for producing an extra output of a unit.
Marginal external benefit (MEB): The marginal external benefit refers to the amount of additional benefits obtained in the process of increasing one more unit of output to third party.
Marginal external cost (MEC): The marginal external cost refers to the amount of additional cost obtained in the process of increasing one more unit of output to third party.
Want to see more full solutions like this?
Chapter 30 Solutions
Bundle: Economics, Loose-leaf Version, 13th + MindTap Economics, 1 term (6 months) Printed Access Card
- In 2020, the International Monetary Fund prescribed a carbon tax as the best way for governments around the world to meet their carbon emissions targets. A carbon tax is an economywide tax levied per tonne of carbon emitted by firms as a by-product of their production. Such a tax will likely increase business costs in the short run, especially for those firms whose production processes emit significant amounts of carbon. In the longer term, however, it is hoped that the tax will provide incentives for firms to invest in alternative production techniques that emit less carbon. Using the AD-AS framework, explain how the imposition of such a tax might impact inflation, economic activity and employment in the short run and the long run. Can you please please please show it in a graph the AD-AS framework its very important. Please have a through look and answer it.arrow_forwardPlease explain the theory of external economiesarrow_forwardIn an article in the agriculture magazine Choices, Oregon State University economist JunJie Wu made the following observation about the conversion of farmland to urban development: Land use provides many economic and social benefits, but often comes at a substantial cost to the environment. Although most economic costs are figured into land use decisions, most environmental externalities are not. These environmental "externalities" cause a divergence between private and social costs for some land uses, leading to an inefficient land allocation. For example, developers may not bear all the environmental and infrastructural costs generated by their projects. Such "market failures" provide a justification for private conservation efforts and public land use planning and regulation. What does the author mean by market failures and inefficient land use allocation? Explain why the author describes inefficient land allocation as a market failure. Illustrate your argument with a…arrow_forward
- Graphically analyze the effect that a revenue neutral carbon tax has on the consumption of carbon intensive goods.arrow_forwardExplain Ecological Models and also define simplifying assumptions to construct such a model ?arrow_forwardWhat are (environmental) externalities? Explain one example from production/consumption condition that would result in negative externalitiesarrow_forward
- Describe four ways in which neoclassical economic approaches can contribute to environmental problems.arrow_forwardGoods that are inherently non-excludable and unrivalled are referred to as .arrow_forwardLet's say that we are trying to estimate loss in value caused by loss of recreational opportunities when a beach became contaminated by PCB's (polychlorinated biphenyls - highly toxic industrial compounds). Through visitor surveys using travel cost analysis methods, the demand curve for a clean beach is estimated as P=50-10*Visits per capita per year. For the contaminated beach, a new demand curve is estimated as P=30-10*Visits per capita per year. Let's say the cost of visiting the beach (includes travel and any other expenses) is $20 on average. Calculate an estimate of lost value for the average visitor per year between having a clean versus contaminated beach, using the travel cost method with this information. Enter your answer in the box below using number for the dollar value only. Do NOT enter $ sign.arrow_forward
- Please explain the theory of external economies along with its three componentsarrow_forward43. Use the graph to answer the question that follows.Which of the following can cause the relationship shown between MSC and MPC? A decrease in financial instability from unlawful investing An increase in investment to support educational funding A decrease in fish population caused by overfishing a lake A decrease in air pollution caused by a nuclear energy plant An increase in research and development funding of a product 44. A perfectly competitive market will not produce the socially optimal quantity in long-run equilibrium if there are external costs or benefits along with unclear property rights there is no government intervention the government institutes a lump-sum tax or lump-sum subsidy the individual firms have achieved minimum efficient scale there is perfectly symmetric informationarrow_forwardAre negative externalities considered on a microeconomics analysis? Why or why not?arrow_forward