ECONOMICS PACKAGE (APSU)>CUSTOM<
17th Edition
ISBN: 9781323403891
Author: Hubbard
Publisher: PEARSON C
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Chapter 5, Problem 5.4.12PA
To determine
The economic problem that the elders were trying to prevent.
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Q. 2
Suppose that the government does not intervene in the market. Compute country B’s welfare under autarky and free trade with the negative production externality.
Briefly explain if country A’s welfare is affected by the production externality in B.
Do you agree with the claim that welfare under free trade (compared to autarky) improves in both countries when a negative production externality is present ?
Briefly explain why
Four roommates are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Here is the willingness to pay for each film.
Dwayne
Javier
Salman
Chris
First Film
$7
$5
$3
$2
Second Film
6
4
2
1
Third Film
5
3
1
0
Fourth Film
4
2
0
0
Fifth Film
3
1
0
0
Within the dorm room, is the showing of a movie a public good? Why or why not?
If it costs $8 to stream a movie, how many movies should the roommates stream to maximize total surplus?
If they choose the optimal number from part (b) and then split the cost of streaming the movies equally, how much surplus does each person obtain from watching the movies?
Is there any way to split the cost to ensure that everyone benefits? What practical problems does this solution raise?
Suppose they agree in advance to choose the optimal number of movies and split the cost equally. When Dwayne is asked his willingness to…
The following graph (see link below) represents the market for high-emission cars. Answer the following questions assuming that the externality is not internalised.
- What is the social value of the last unit traded on the market?
- What is the social cost of the last unit traded on the market?
- Which quantity is socially optimal (what is the effecient quantity)?
- What is the deadweight loss generated by the externality?
Chapter 5 Solutions
ECONOMICS PACKAGE (APSU)>CUSTOM<
Ch. 5 - Prob. 5.1.1RQCh. 5 - Prob. 5.1.2RQCh. 5 - Prob. 5.1.3RQCh. 5 - Prob. 5.1.4RQCh. 5 - Prob. 5.1.5RQCh. 5 - Prob. 5.1.6PACh. 5 - Prob. 5.1.7PACh. 5 - Prob. 5.1.8PACh. 5 - Prob. 5.1.9PACh. 5 - In a study at a large state university, students...
Ch. 5 - Prob. 5.1.11PACh. 5 - Prob. 5.1.12PACh. 5 - Prob. 5.1.13PACh. 5 - Prob. 5.2.1RQCh. 5 - Prob. 5.2.2RQCh. 5 - Prob. 5.2.3RQCh. 5 - Prob. 5.2.4PACh. 5 - Prob. 5.2.5PACh. 5 - Prob. 5.2.6PACh. 5 - Prob. 5.2.7PACh. 5 - Prob. 5.2.8PACh. 5 - Prob. 5.2.9PACh. 5 - Prob. 5.2.10PACh. 5 - Prob. 5.2.11PACh. 5 - Prob. 5.3.1RQCh. 5 - Prob. 5.3.2RQCh. 5 - Prob. 5.3.3RQCh. 5 - Prob. 5.3.4PACh. 5 - Prob. 5.3.5PACh. 5 - Prob. 5.3.6PACh. 5 - Prob. 5.3.7PACh. 5 - Prob. 5.3.8PACh. 5 - Prob. 5.3.9PACh. 5 - Prob. 5.3.10PACh. 5 - Prob. 5.3.11PACh. 5 - Prob. 5.3.12PACh. 5 - Prob. 5.3.13PACh. 5 - Prob. 5.3.14PACh. 5 - Prob. 5.3.15PACh. 5 - Prob. 5.3.16PACh. 5 - Prob. 5.4.1RQCh. 5 - Prob. 5.4.2RQCh. 5 - Prob. 5.4.3RQCh. 5 - Prob. 5.4.4PACh. 5 - Prob. 5.4.5PACh. 5 - Prob. 5.4.6PACh. 5 - Prob. 5.4.7PACh. 5 - Prob. 5.4.8PACh. 5 - Prob. 5.4.9PACh. 5 - Prob. 5.4.10PACh. 5 - Prob. 5.4.11PACh. 5 - Prob. 5.4.12PA
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Similar questions
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- Explain why environmental pollution is regarded as a source of market failure. Briefly describe two different policies which a government might implement to reduce pollution.arrow_forwardFour roommates are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Here is their willingness to pay for each film: Dwayne Javier Salman Chris First film $ 7 $ 5 $3 $2 Second film 6 4 2 1 Third film 5 3 1 0 Fourth film 4 2 0 0 Within the dorm room, is the showing of a movie a public good? Why or why not? If it costs $8 to stream a movie, how many movies should the roommates stream to maximize totalsurplus?c. If they choose the optimal number from part (b) and then split the cost of streaming the movies equally, how much surplus does each person obtain from watching the movies?d. Is there any…arrow_forwardA country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwood’s forest and grow corn, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table shows possible combinations of economic output and environmental protection. a. 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. b. Which choices display productive efficiency? How can you tell? c. Which choices show allocative efficiency? How can you tell? d. In the choice between T and R, decide which one is better. Why? e. In the choice between T and S, can you say which one is better, and why? f. 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…arrow_forward
- The following graph represents the market for high-emissions cars. Answer this question assuming that the externality is not internalised. Which quantity is socially optimal (i.e. what is the efficient quantity)? What is the deadweight loss generated by the externality?arrow_forward7. (Market for Pollution Rights) The graph in page 302 shows the market for pollution rights. a. If there are no restrictions on pollution, what amount isdischarged? b. What is the quantity supplied and the quantitydemanded if the government restricts the amount ofdischarge to Q* but gives the permits away? c. Where is market equilibrium if the government sells thepermits at the market-clearing price? Illustrate this on the graph.arrow_forwardThere are three industrial firms in Kitona. The Government wants to reduce pollution to 120 units, so it gives each firm 40 tradable pollution permits. Firm Initial Pollution Level Cost reducing pollution by 1 unit A 70 Units $20 B 80 Units $25 C 50 Units $10 Who sells permits and how many do they sell? Who buys permits and how many do they buy? Briefly explain why the sellers and buyers are each willing to do so. What is the total cost of pollution reduction in this situation? How much higher would the cost of pollution reduction be if the permits could not be traded?arrow_forward
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