The market for good Q is perfectly competitive. However, it features negative externalities. Consumers' marginal benefit is MB = 90-Q Producers' marginal private cost is MC = Q. The production of this good generates a marginal exter a) In the equilibrium of this market, the perfect competit b) The socially efficient quantity is QSOC= *Select Answer* $2 per unit subsidy $4 per unit subsidy $2 per unit tax + 7 = 45 $4 per unit tax 40 c) To achieve efficiency, the government can introduce a 41 43 50

The market for good Q is perfectly competitive. However, it features negative externalities. Consumers' marginal benefit is MB = 90-Q Producers' marginal private cost is MC = Q. The production of this good generates a marginal exter a) In the equilibrium of this market, the perfect competit b) The socially efficient quantity is QSOC= Select Answer $2 per unit subsidy $4 per unit subsidy $2 per unit tax + 7 = 45 $4 per unit tax 40 c) To achieve efficiency, the government can introduce a 41 43 50

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter13: Positive Externalities And Public Goods

Section: Chapter Questions

Problem 24P: Assume that the marginal private costs of a film producing fuel-efficient can; is greater than the...

See similar textbooks

Similar questions

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 Fe and Qe. On the graph, shade in the deadweight loss at the market output.
Assume that the marginal private costs of a film producing fuel-efficient can; is greater than the marginal social costs. Assume that the marginal private benefits of a firm producing fuel efficient cars are the same as the marginal social benefits. Discuss one wags.r that the government cans ï¬‚y to increase production and sales of fuel efficient cars to the socially desirable amount. Hint: the government is flying to affect production through costs, net benefits.
Give an example of a positive externality and an example of a negative externality.
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?
Refer to Table 12.2. The externality created by the refrigerator production was 100. However, once we accounted for both the private and additional external costs, the market price increased by only 50. If the external costs were 100 why did the price only increase by 50 when we accounted for all costs?
Do market demand curves reflect positive externalities? Why or why not?