Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134739090
Author: Hubbard
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 5.4.6PA
Sub part (a):
To determine
The optimal size of the park.
Sub part (b):
To determine
The optimal size of the park.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Power 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.
Suppose 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?
Whenever we think of a resource, say forest, the value that immediately comes to our mind is the utility that we drive directly from the resource, such as timber. However as environmental scientist, we know that a forest has other values other than direct use value of economic value of a resource.
How can a coral reef area or a forest be a market failure under the tragedy of the commons of Hardin?
Chapter 5 Solutions
Economics (7th Edition) (What's New in Economics)
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. 5.4.12PACh. 5 - Prob. 5.1CTECh. 5 - Prob. 5.2CTE
Knowledge Booster
Similar questions
- 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.arrow_forward1.Suppose that elk hunting permits are sold in a competitive market by landowners who own property where elk reside, and one permit is required to harvest each elk. The demand curve for elk hunting permits is p=180-0.5q . The total cost to the landowners of allowing q elk to be harvested on their properties is C(q)=0.125q^2 . Draw a graph depicting this scenario. 2. Now assume there also is an amenity value associated with the presence of elk in the forest for wildlife watching and ecosystem health. This is a benefit that accrues to the public at large, not only to the elk hunters or property owners. The external benefits from having Q elk remaining in the forest after each hunting season is 50Q . There are Q0 elk in the forest at the beginning of each hunting season, so Q=Q0-q . Draw a graph depicting this scenario.arrow_forwardConsider a market with the following supply and demand. (It may help to draw a graph for these questions.) P 5 6 7 8 9 10 11 12 13 14 QS 200 300 400 500 600 700 800 900 1000 1100 QD 800 750 700 650 600 550 500 450 400 350 If there is an external cost of $3, what is the efficient quantity? If there is an external benefit of $3, what is the efficient quantity? For the remaining questions assume that there is a $3 external COST. If the government wants to get the efficient quantity with a per/unit tax, how much should the tax be? Now imagine that they use tradable allowances. If they cap the quantity at 400 what would the value of these allowance be in the market? (Assume the market is perfectly competitive and that "one allowance" lets you…arrow_forward
- Consider a market with the following supply and demand. (It may help to draw a graph for these questions.) P 5 6 7 8 9 10 11 12 13 14 QS 200 300 400 500 600 700 800 900 1000 1100 QD 800 750 700 650 600 550 500 450 400 350 If there is an external cost of $3, what is the efficient quantity? If there is an external benefit of $3, what is the efficient quantity? For the remaining questions assume that there is a $3 external COST. If the government wants to get the efficient quantity with a per/unit tax, how much should the tax be? Now imagine that they use tradable allowances. If they cap the quantity at 400 what would the value of these allowance be in the market? (Assume the market is perfectly competitive and that "one allowance" lets you…arrow_forwardThe Cemex plant in Davenport produced cement. The production of cement created dust which traveled through the air and landed on the nearby area. Testing at an elementary school and fire department near the plant showed toxic levels of Chromium 6 resulting from the dust. Using the concept of externalities and the graph below, explain what kind of externality this event created and the effects this had on economic efficiency. Be sure to indicate any differences between market price and quantity for cement and the efficient price and quantity.arrow_forwardTable 11-1 Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The following table shows each resident's willingness to pay for each acre of the park. Acres Willingness to Pay (Dollars) Sophia Amber Cedric 1 10 24 6 2 8 18 5 3 6 14 4 4 3 8 3 5 1 6 2 6 0 4 1 7 0 2 0 Refer to Table 11-1. 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. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?"arrow_forward
- 3. Use the graph to answer the question that follows.Assume that the market shown is perfectly competitive with no externalities. If the production output is 15,000 units, then A-the market is allocatively efficient B-there is a shortage of the good C-deadweight loss is being minimized D-deadweight loss is being maximized E- consumer and producer surplus are maximized 5.Use the graph to answer the question that follows. What is the market equilibrium quantity and price at which there is no government regulation? A-15, $17.50 B-20, $15 C-30, $25 D-35, $22.50 E- Indeterminatearrow_forwardConsider the above graph. Is there an externality present in this market? If so, what kind? No, there is no externality. Yes, a negative externality. Yes, a positive externality.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Principles of MicroeconomicsEconomicsISBN:9781305156050Author:N. Gregory MankiwPublisher:Cengage Learning
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Principles of Microeconomics
Economics
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc