Explanation Generally when the market fails to produce and distribute its goods and services efficiently, it is termed as a market failure. Here the author explains that the market failure is due the inefficient allocation of farmland for other uses. The conversion of farmland to developed land is termed as inefficient allocation of the land. This inefficient allocation of land is an important reason for the market failure. The efficient allocation of farmland is explained with the help of a figure as shown below: Figure 1 shows the shift in the supply curve of the farm land.

Economics, Student Value Edition Plus MyLab Economics with Pearson eText - Access Card Package (6th Edition)

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ISBN: 9780134421322

Author: R. Glenn Hubbard, Anthony Patrick O'Brien

Publisher: PEARSON

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Chapter 5, Problem 5.1.13PA

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What is a market failure.

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Chapter 5, Problem 5.1.12PA

Chapter 5, Problem 5.2.1RQ

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Economics, Student Value Edition Plus MyLab Economics with Pearson eText - Access Card Package (6th Edition)

Ch. 5 - Prob. 5.1.1RQ Ch. 5 - Prob. 5.1.2RQ Ch. 5 - Prob. 5.1.3RQ Ch. 5 - Prob. 5.1.4RQ Ch. 5 - Prob. 5.1.5RQ Ch. 5 - Prob. 5.1.6PA Ch. 5 - Prob. 5.1.7PA Ch. 5 - Prob. 5.1.8PA Ch. 5 - Prob. 5.1.9PA Ch. 5 - In a study at a large state university, students...

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Give an example of a positive externality and an example of a negative externality.
Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and output. a. Assuming that the production of televisions generates external costs, illustrate the effect of the producers being forced to pay a tax equal to the external costs generated, and indicate the equilibrium output. b. If instead of generating external costs, television production generates external benefits, illustrate the effect of the producers being given a subsidy equal to the external benefits generated, and indicate the equilibrium output.
A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwoods forest and grow com, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between T and R, decide which one is better. Why? In the choice between T and S, can you say which one is better, and why? If you had to guess, which choice would you think is more likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?

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