Question 1

Scenario 10-3
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Suppose the equation for the demand curve in a market is P = 120 - (1/5) QS1U1P1DS1S1P0 , where QS1U1P1DS1S1P0 is the quantity demanded and $P$ is the price. Also, suppose the equation for the supply curve in the same market is P = (1/10) QS1U1P1S S1S1P0, where QS1U1P1SS1S1P0 is the quantity supplied.
-Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What is the social cost of producing 30 units of the good?

Accepted Answer

The answer of Scenario 10-3
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Suppose the equation for the demand...

Question 2

Does the phenomenon of externalities strengthen the argument that we should rely upon the "invisible hand" of the marketplace, or does it weaken that argument?

Accepted Answer

The answer of Does the phenomenon of externalities strengthen the...

Question 3

At any given quantity, the willingness to pay of the marginal buyer is the height of the __________.

Accepted Answer

The answer of At any given quantity, the willingness to...

Question 4

Scenario 10-3
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Suppose the equation for the demand curve in a market is P = 120 - (1/5) QS1U1P1DS1S1P0 , where QS1U1P1DS1S1P0 is the quantity demanded and $P$ is the price. Also, suppose the equation for the supply curve in the same market is P = (1/10) QS1U1P1S S1S1P0, where QS1U1P1SS1S1P0 is the quantity supplied.
-Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What particular tax or subsidy would move the market to the social optimum?

Accepted Answer

The answer of Scenario 10-3
​
Suppose the equation for the demand...

Question 5

Assume each gallon of gasoline that is produced gives rise to an external cost of $1.25. On any given day, the production of the 10,000^th gallon of gasoline entails a private value of $4.00 and a social cost of $3.50. What is the private cost of the 10,000^th gallon?

Accepted Answer

The answer of Assume each gallon of gasoline that is...

Question 6

Scenario 10-3
​
Suppose the equation for the demand curve in a market is P = 120 - (1/5) QS1U1P1DS1S1P0 , where QS1U1P1DS1S1P0 is the quantity demanded and $P$ is the price. Also, suppose the equation for the supply curve in the same market is P = (1/10) QS1U1P1S S1S1P0, where QS1U1P1SS1S1P0 is the quantity supplied.
-Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What is the equation of the social-cost curve?

Accepted Answer

The answer of Scenario 10-3
​
Suppose the equation for the demand...

Question 7

Briefly explain how research into new technologies gives rise to a positive externality.

Accepted Answer

The answer of Briefly explain how research into new technologies...

Question 8

Does research into new technologies create a positive externality or does it create a negative externality?

Accepted Answer

The answer of Does research into new technologies create a...

Question 9

Suppose the market-equilibrium quantity of good x is larger than the socially-optimal quantity of good x. Does the production of good x convey a positive externality or does it convey a negative externality?

Accepted Answer

The answer of Suppose the market-equilibrium quantity of good x...

Question 10

Bruce engages in an activity that diminishes the well-being of Shawna. Bruce pays no compensation to Shawna for her loss in well-being. What specific term do economists use to describe this situation?

Accepted Answer

The answer of Bruce engages in an activity that diminishes...

Question 11

Scenario 10-3
​
Suppose the equation for the demand curve in a market is P = 120 - (1/5) QS1U1P1DS1S1P0 , where QS1U1P1DS1S1P0 is the quantity demanded and $P$ is the price. Also, suppose the equation for the supply curve in the same market is P = (1/10) QS1U1P1S S1S1P0, where QS1U1P1SS1S1P0 is the quantity supplied.
-Refer to Scenario 10-3. What are the market equilibrium quantity and price?

Accepted Answer

The answer of Scenario 10-3
​
Suppose the equation for the demand...

Question 12

Suppose the socially-optimal quantity of good x is larger than the market-equilibrium quantity of good x. Does the production of good x convey a positive externality or does it convey a negative externality?

Accepted Answer

The answer of Suppose the socially-optimal quantity of good x...

Question 13

Scenario 10-3
​
Suppose the equation for the demand curve in a market is P = 120 - (1/5) QS1U1P1DS1S1P0 , where QS1U1P1DS1S1P0 is the quantity demanded and $P$ is the price. Also, suppose the equation for the supply curve in the same market is P = (1/10) QS1U1P1S S1S1P0, where QS1U1P1SS1S1P0 is the quantity supplied.
-Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What are the socially optimal quantity and price?

Accepted Answer

The answer of Scenario 10-3
​
Suppose the equation for the demand...

Question 14

Does the restoration of historic buildings create a positive externality or does it create a negative externality?

Accepted Answer

The answer of Does the restoration of historic buildings create...

Question 15

Suppose a tax is imposed on producers of aluminum as a means of internalizing the externality associated with aluminum production. If the tax accurately reflects the external costs of pollutants released into the atmosphere, then the new supply curve for aluminum coincides with which other curve?

Accepted Answer

The answer of Suppose a tax is imposed on producers...

Question 16

Sheryl sits on her patio and plays her guitar while her neighbors are outside. Sheryl neither pays nor receives any compensation for playing her guitar. Under what condition does her guitar-playing give rise to a positive externality?

Accepted Answer

The answer of Sheryl sits on her patio and plays...

Question 17

At any given quantity, the cost of the marginal seller is the height of the __________.

Accepted Answer

The answer of At any given quantity, the cost of...

Question 18

​Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $20. Assuming no transaction costs, an efficient solution would be for Sophia to pay Gabriel $15 to not recline his seat.
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Accepted Answer

According to the Coase Theorem, if transaction costs are negligible and property rights are clearly defined, parties will negotiate to reach a mutually beneficial and efficient outcome regardless of the initial allocation of rights. In this case, Sophia values the seat not being reclined more than Gabriel values his right to recline. Therefore, it's efficient for her to compensate him to not recline, and $15 is an amount that benefits both, making it a Coasean solution.

Question 19

​The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.

Accepted Answer

The majority of economists agree that the social benefits of mandating measles vaccines, such as preventing outbreaks, saving lives, and reducing healthcare costs, far outweigh the social costs associated with implementing such mandates. This consensus is based on the understanding that vaccines are a cost-effective public health measure.

Question 20

Suppose a subsidy is offered to consumers of education as a means of internalizing the externalities associated with education. If the subsidy accurately reflects the external benefits of education, then the new demand curve for education coincides with which other curve?

Accepted Answer

The answer of Suppose a subsidy is offered to consumers...

Quiz 10: Externalities

Does the phenomenon of externalities strengthen the argument that we should rely upon the "invisible hand" of the marketplace, or does it weaken that argument?

At any given quantity, the willingness to pay of the marginal buyer is the height of the __________.

Assume each gallon of gasoline that is produced gives rise to an external cost of $1.25. On any given day, the production of the 10,000th gallon of gasoline entails a private value of $4.00 and a social cost of $3.50. What is the private cost of the 10,000th gallon?

Briefly explain how research into new technologies gives rise to a positive externality.

Does research into new technologies create a positive externality or does it create a negative externality?

Suppose the market-equilibrium quantity of good x is larger than the socially-optimal quantity of good x. Does the production of good x convey a positive externality or does it convey a negative externality?

Bruce engages in an activity that diminishes the well-being of Shawna. Bruce pays no compensation to Shawna for her loss in well-being. What specific term do economists use to describe this situation?

Suppose the socially-optimal quantity of good x is larger than the market-equilibrium quantity of good x. Does the production of good x convey a positive externality or does it convey a negative externality?

Does the restoration of historic buildings create a positive externality or does it create a negative externality?

Suppose a tax is imposed on producers of aluminum as a means of internalizing the externality associated with aluminum production. If the tax accurately reflects the external costs of pollutants released into the atmosphere, then the new supply curve for aluminum coincides with which other curve?

Sheryl sits on her patio and plays her guitar while her neighbors are outside. Sheryl neither pays nor receives any compensation for playing her guitar. Under what condition does her guitar-playing give rise to a positive externality?

At any given quantity, the cost of the marginal seller is the height of the __________.

​Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $20. Assuming no transaction costs, an efficient solution would be for Sophia to pay Gabriel $15 to not recline his seat. ​

​The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.

Suppose a subsidy is offered to consumers of education as a means of internalizing the externalities associated with education. If the subsidy accurately reflects the external benefits of education, then the new demand curve for education coincides with which other curve?

Assume each gallon of gasoline that is produced gives rise to an external cost of $1.25. On any given day, the production of the 10,000^th gallon of gasoline entails a private value of $4.00 and a social cost of $3.50. What is the private cost of the 10,000^th gallon?

Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $20. Assuming no transaction costs, an efficient solution would be for Sophia to pay Gabriel $15 to not recline his seat.

The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.