Question 1

Scenario 10-3
  Suppose the equation for the demand curve in a market is
where is the quantity demanded and is the price.
    Also, suppose the equation for the supply curve in the same market is ,
where 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...

Question 2

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 3

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 4

Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0restored historic building entails the following:
-a private cost of $800,000;
-a private value of $650,000;
-a social value of $800,000.
-Refer to Scenario 10-2. Is there an external cost associated with the restoration of the 50th historic building, or is there an external benefit? What is the amount of that external cost or external benefit?

Accepted Answer

The answer of Scenario 10-2
The demand curve for restored historic...

Question 5

Scenario 10-3
  Suppose the equation for the demand curve in a market is
where is the quantity demanded and is the price.
    Also, suppose the equation for the supply curve in the same market is ,
where 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...

Question 6

Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0fire extinguisher entails the following:
-a private cost of $10;
-an external cost of $0;
-a private value of $9;
-an external benefit of $3.
-
-Refer to Scenario 10-4. What is the social value of the 500th fire extinguisher?

Accepted Answer

The answer of Scenario 10-4
The demand curve for fire extinguishers...

Question 7

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?

Accepted Answer

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

Question 8

Scenario 10-3
  Suppose the equation for the demand curve in a market is
where is the quantity demanded and is the price.
    Also, suppose the equation for the supply curve in the same market is ,
where 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...

Question 9

Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0restored historic building entails the following:
-a private cost of $800,000;
-a private value of $650,000;
-a social value of $800,000.
-Refer to Scenario 10-2. Is the socially optimal quantity of restored historic buildings less than, equal to, or greater than 50?

Accepted Answer

The answer of Scenario 10-2
The demand curve for restored historic...

Question 10

Assume each college degree that is granted conveys an external benefit of $3,500. The granting of the 500th college degree entails a private cost of $15,000 and a private value of $25,000. What is the social value of the 500th college degree?

Accepted Answer

The answer of Assume each college degree that is granted...

Question 11

Scenario 10-3
  Suppose the equation for the demand curve in a market is
where is the quantity demanded and is the price.
    Also, suppose the equation for the supply curve in the same market is ,
where 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...

Question 12

Scenario 10-4
The demand curve for fire extinguishers slopes downward and the supply curve for fire extinguishers slopes upward. The production of the 500S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0fire extinguisher entails the following:
-a private cost of $10;
-an external cost of $0;
-a private value of $9;
-an external benefit of $3.
-
-Refer to Scenario 10-4. Does the production of fire extinguishers convey a positive externality, a negative externality, or neither?

Accepted Answer

The answer of Scenario 10-4
The demand curve for fire extinguishers...

Question 13

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 14

Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0restored historic building entails the following:
-a private cost of $800,000;
-a private value of $650,000;
-a social value of $800,000.
-Refer to Scenario 10-2. Is there an externality associated with this market? If your answer is "Yes," is the externality positive or negative?

Accepted Answer

The answer of Scenario 10-2
The demand curve for restored historic...

Question 15

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...

Question 16

Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0restored historic building entails the following:
-a private cost of $800,000;
-a private value of $650,000;
-a social value of $800,000.
-Refer to Scenario 10-2. Is the market equilibrium quantity of restored historic buildings less than, equal to, or greater than 50?

Accepted Answer

The answer of Scenario 10-2
The demand curve for restored historic...

Question 17

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 18

Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50S1U1P1tS1S1P0S1U1P1hS1S1P0S1U1P1 S1S1P0restored historic building entails the following:
-a private cost of $800,000;
-a private value of $650,000;
-a social value of $800,000.
-Refer to Scenario 10-2. Could the government impose a tax or provide a subsidy to move the market to the social optimum? If your answer is "Yes," should it be a tax or should it be a subsidy?

Accepted Answer

The answer of Scenario 10-2
The demand curve for restored historic...

Question 19

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 20

Scenario 10-3
  Suppose the equation for the demand curve in a market is
where is the quantity demanded and is the price.
    Also, suppose the equation for the supply curve in the same market is ,
where 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
  Suppose the equation for...

Quiz 10: Externalities

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?

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?

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?

Assume each college degree that is granted conveys an external benefit of $3,500. The granting of the 500th college degree entails a private cost of $15,000 and a private value of $25,000. What is the social value of the 500th college degree?

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

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?

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?

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