True-False-Uncertain. Respond to following statements as True, False, Uncertain and justify your claim. According to the Coase Theorem, government intervention is needed to solve externalities. It always makes sense when a public good is financed by the government. If A is Pareto efficient and B is Pareto inefficient, A must be a Pareto improvement over B. According to Arrow’s impossibility theorem, a democratic society will always make consistent decisions

True-False-Uncertain. Respond to following statements as True, False, Uncertain and justify your claim. According to the Coase Theorem, government intervention is needed to solve externalities. It always makes sense when a public good is financed by the government. If A is Pareto efficient and B is Pareto inefficient, A must be a Pareto improvement over B. According to Arrow’s impossibility theorem, a democratic society will always make consistent decisions

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.7P

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Similar questions

1) True-False-Uncertain. Respond to following statements as True, False, Uncertain and justify your claim. Answers that do not provide justification will receive zero points. According to the Coase Theorem, government intervention is needed to solve externalities. It always makes sense when a public good is financed by the government. If A is Pareto efficient and B is Pareto inefficient, A must be a Pareto improvement over B. According to Arrow’s impossibility theorem, a democratic society will always make consistent decisions.
True-False-Uncertain. Respond to following statements as True, False, Uncertain and justify your claim. Answers that do not provide justification will receive zero points. a) According to the Coase Theorem, government intervention is needed to solve externalities. b) It always makes sense when a public good is financed by the government. c) If A is Pareto efficient and B is Pareto inefficient, A must be a Pareto improvement over B.
The Lindahl model presupposes that the public good is delivered in such a way that everyone ____________ from it.
For each of the following, indicate whether the statement is True, False, or Uncertain, and explain your answer. (No credit will be given without an explanation.) In the exchange problem, it is inefficient to give everything to one person. In the Lindahl mechanism, everyone pays the same price for a public good. The socially efficient solution is to not produce any externality.
Markets do not handle externalities well. With a ____________________ externality, the market produces too much of a good; whereas with a ________________________ externality, the market produces too little of a good. In both cases, if the market creates ________________ _______________, meaning the market is not efficient because it is not fully capturing the ____________ __________ of positive externalities nor the __________________ ___________ of negative externalities.
Assume that Matt, Joe, and Teresa are the only citizens in a community. A proposed public good has a total cost of $1,000. All three citizens will share an equal portion of this cost in taxes. The benefit of the public good is $380 for Matt, $360 for Joe, and $200 for Teresa. In a majority vote, this proposal will most likely be Multiple Choice accepted; the public good is produced, even though it is economically inefficient. defeated; the public good is not produced, which is the proper outcome. defeated; the public good is not produced, even though it would have been efficient to do so. accepted; the public good is produced, which is economically efficient.
Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Pe and Qe. On the graph, shade in the deadweight loss at the market output.
Model the underprovision of a public good as a prisoner's dilemma. To make the modeling easier, you may assume that the economy consists of two people.
The government wants to address the pollution associated with the production of a good by introducing a tax on negative externality. The government is unsure about the magnitude of the negative externality (social cost of pollution) and hence it is considering two options: a high tax and a low tax option. Which statement(s) is/are true? Mark all that applies. Group of answer choices The government’s tax revenue will be higher under the high tax option. The government’s tax revenue may not be higher under the high tax options. The consumption level of the good may be lower under the high tax option. Regardless of whether the high tax or the low tax option is introduced, the cost of the tax is still lower than the social cost of pollution. Both high tax and low tax options are cost-effective in achieving a given level of pollution reduction as long as the same tax applies to all polluting sources. Only the high tax option is cost-effective.
Externalities Mark owns a butchery. His marginal cost of selling meat is MC = 0.35Q, where Q is the pounds of meat he sells. Mark is in a competitive market and can sell all the meat he wishes for $7 per pound. However, the smell from the butchery bothers the customers of George, the owner of the coffee shop next door. Assume that every pound of meat costs George $1.4 worth of lost business. If Mark focuses on maximizing his profit, how much would he sell? At the profit-maximizing quantity from part a, does selling the last pound of meat benefit the society. Calculate the social marginal cost and compare it to the marginal benefit. Note that here “society” refers to Mark and George. What is the socially optimal quantity of meat sold?
Adam and Catherine are choosing between two ice cream shops, Icy and Frosty, located at either end of a 1-mile-long beach. Adam is standing in front of Icy, while Catherine is standing in front of Frosty. Both Adam and Catherine are each willing to pay, at most, $6 for one ice cream cone. It costs them $1 to walk the 1-mile distance between the shops. Icy is government- run, so the price is fixed at exactly $4/cone and will not change. The shops face costs of $o.25/cone. What price should Frosty charge if it is to maximize its total profits from Adam and Catherine?
Suppose the production possibility frontier for an economy that produces one public good (x) and one private good (y) is given by 100x + y = 5,000. This economy is populated by 100 identical individuals, each with a utility function of the form utility = Vxy, where y, is the individual's share of private good production (= y/100). Notice that the public good is nonexclusive and that everyone benefits equally from its level of production.