In a perfectly competitive market, the efficient quantity of a good will be produced when the good is: rival in consumption and nonexcludable. rival in consumption and excludable. nonrival in consumption and excludable. nonrival in consumption and nonexcludable.
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- Which of the following characteristics is required if a good is to be efficiently provided by profit-seeking firms? O The good should be excludable and rival in consumption. The good should be a consumer good. The good should not be an inferior good. The good should be subject to the free rider problem.Consider a competitive market for Good Y. This good involves a negative consumption externality. i) Is this market efficient? Why? ii) Imagine that the competitive market for Good Y consolidates and becomes a monopoly. Does this make the market more, or less efficient relative to the situation above? Include a graph to make the point clearer.For each of the goods, identify the characteristics that describe each good. Note that each good will be described with two characteristics. Rivalrous is also referred to as rival in consumption. Consider only the immediate benefits and costs, not any externalities. National Defense Pay- Per- View Cable Television A Hot Pocket Sandwich Private Classroom Education Pajamas A unicycle Excludable Nonrivalrous Nonexcludable Rivalrous
- To produce honey, beekeepers place hives of bees in the fields of farmers. As bees gather nectar, they pollinate the crops in the fields, increasing the yields of these fields at no additional cost to the farmer. a) Is this an externality in consumption or production? b) Is this a negative or positive externality? c) If this externality is not internalized, would beekeepers produce more or less bees than socially optimal? Why? d) Suggest a market-based solution that would internalize the externality. In your answer, give reference to the social cost and social value curves. e) What might be a reasonable private solution to this externality and how might the solution be reached?Suppose that a chemical manufacturing plant is releasing nitrogen oxides into the air, and these emissions are associated with health and ecological damages. Economists have estimated the following marginal costs and benefits for the chemical market, where Q is monthly output in thousands of pounds and P is price per pound. MSB = 50 – 0.4Q MSC = 2 + 0.4Q MEB = 0 MEC = 0.2Q. Find the efficient equilibrium, QE and PE.Assume a perfectly competitive market with no externalities. The demand curve is P =52 - 0.06×Qd. The supply curve is P =0.06×Qs. In equilibrium, what is total surplus?
- The efficient level of paper production is more likely to occur A) in a market with positive externalities B) in a market with negative externalities C) in a market with a market failure D) in a market without externalitiesTable 17-5. Imagine a small town in which only two residents, Kunal and Naj, own wells that produce safe drinking water. Each week Kunal and Naj work together to decide how many gallons of water to pump, to bring the water to town, and to sell it at whatever price the market will bear. Assume Kunal and Naj can pump as much water as they want without cost so that the marginal cost of water equals zero.The weekly town demand schedule and total revenue schedule for water are shown in the table below. WeeklyQuantity(in gallons) Price WeeklyTotal Revenue(and Total Profit) 0 $12 $ 0 25 11 275 50 10 500 75 9 675 100 8 800 125 7 875 150 6 900 175 5 875 200 4 800 225 3 675 250 2 500 275 1 275 300 0 0 Refer to Table 17-5. Since Kunal and Naj operate as a profit-maximizing monopoly in the market for water, what price will they charge for water? Group of answer choices…The town has a kayak rental and visitors use the lake for recreation. The town also has a chemical lab that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the chemical lab's waste decreases the kayak rental's economic profit. Suppose that the chemical lab could use a different production method that involves recycling water. This would reduce the pollution in the lake to levels safe for recreation, and the kayak rental would no longer be affected. If the chemical lab uses the recycling method, then the chemical lab's economic profit is $900 per week, and the kayak rental's economic profit is $2,600 per week. If the chemical lab does not use the recycling method, then the chemical lab's economic profit is $1,600 per week, and the kayak rental's economic profit is $1,500 per week. These figures are summarized in the following table. Complete the following table by computing the total profit (the chemical lab's…
- A power plant releases an unpleasant odor into the local environment. This market is perfectly competitive, and the plant does not consider the damages imposed on local citizens in terms of lower air quality. The market can be characterized by the following equations: MPB = 800 - 0.5Q MPC = 80 + 0.3Q MEC = 0.4 Q a) Find the competitive equilibrium price and quantity, Qc and Pc. b) Find the socially optimal (or efficient) price and quantity, Qe and Pe. c) Provide a geographical depiction of the competitive and socially optimal solutions. Make sure you label the graph focusing on the following items: units of each axis, labels of curves (MPC, MPB, MSB, MSC), competitive equilibrium price and quantity, and socially optimal price and quantity. d) Analytically derive the social welfare gains from internalizing the externality AND illustrate this welfare gain on the figure you created in part (c). e) Suppose the plant owns the property rights to local air and it is…The town has a campground whose visitors use the lake for recreation. The town also has a research lab that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the research lab's waste decreases the campground's economic profit. Suppose that the research lab could use a different production method that involves recycling water. This would reduce the pollution in the lake to levels safe for recreation, and the campground would no longer be affected. If the research lab uses the recycling method, then the research lab's economic profit is $1,300 per week, and the campground's economic profit is $2,300 per week. If the research lab does not use the recycling method, then the research lab's economic profit is $2,100 per week, and the campground's economic profit is $1,100 per week. These figures are summarized in the following table. NOTE: Choice for first fill-in-blank is (not used or used), for the second its (not use…Explain the concept of an externality. Explain and show graphically how externalities lead to market failure and an inefficient allocation of resources.
