Homework Answers
A market supply curve reflects the marginal private cost to produce the goods or services. It does not include external cost to society of producing the good. Hence the answer will be:
marginal private costs of producing a good or service.
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A market supply curve reflects the external benefits of producing a good or service. marginal private...
Parks confer many external benefits on society: open space, trees that reduce pollution, and so on.
4. Efficiency in the presence of externalities Parks confer many external benefits on society: open space, trees that reduce pollution, and so on. Therefore, the market equilibrium quantity of parks is not equal to the socially optimal quantity. The following graph shows the demand for parks (their marginal private benefits), the supply of parks (the marginal private costs of producing them), and the marginal social benefits of parks, including both the marginal private benefits and external benefits.Use the black point (plus...
2. If there are external costs from production, we can assume that A. the market supply...
2. If there are external costs from production, we can assume that A. the market supply curve also respresents the marginal social cost (MSC) curve. B. producer surplus exceeds consumer surplus. C. the market supply curve also represents the marginal external cost (MEC) curve. D. social costs of production exceed private costs of production.
1. Individual A and B have the following marginal benefits for private good X: MBA =...
1. Individual A and B have the following marginal benefits for private good X: MBA = 10 - XA MBg = 10 - XB While the cost of producing each unit is 2 dollarsyi.e., MC = 2). You are asked to: a. On a graph, find the market demand function for private good X (hint: make sure to label the angles, elbows, and corners as needed). b. Find the market equilibrium. e. Find consumer A quantity demanded, and consumer B...
S2 Si D2 Dr 0 Quantay Assume D1 reflects private benefits from consumption and assume S1...
S2 Si D2 Dr 0 Quantay Assume D1 reflects private benefits from consumption and assume S1 reflects private costs of production. If we begin with demand curve D1 and supply curve S1 in the figure above and external costs are incorporated into this market, then government should subsidize its production and shift supply from S1 to S2 the vertical distance between S1 and S2 equals external costs. O price will increase from P1 to P4. Ounderproduction equals Q3 minus Q1....
3) Assume that the market for energy efficient window installations in San Diego is perfectly competitive. Quarterly inverse supply and inverse demand are: P 1200 3Q (Private MB) P 440Qs (Private...
3) Assume that the market for energy efficient window installations in San Diego is perfectly competitive. Quarterly inverse supply and inverse demand are: P 1200 3Q (Private MB) P 440Qs (Private MC) neighbors (lowering the overall price of electricity, reducing pollution, and so on) These external benefits to consumers are estimated to be EMB 2Q (the more windows installed, the more external benefit to installing more windows). a) Find the equilibrium price and quantity that will be produced in a...
using this information. The marginal private benefits for a good is represented by MPB = 80...
using this information. The marginal private benefits for a good is represented by MPB = 80 - Q while the marginal social benefits for the good is MSB = 89-Q. Additionally the marginal cost of consuming good A is represented by the equation MC = 20 + 2Q. A. What is the level of consumption that will occur if only the private benefits are considered? B. What is the efficient amount? C. Is it more or less than the amount...
QUESTION 21 Compared with the efficient outcome, the market price of a good that generates external...
QUESTION 21 Compared with the efficient outcome, the market price of a good that generates external benefits is too high too low O optimal O equal to the efficient price QUESTION 22 Products that create external benefits are over-consumed because the private benefits exceed the private costs under-consumed because consumers only consider the private benefits of consumption O optimally consumed as long as private benefits equal private costs O underconsumed because the social costs exceed the social benefits
12. In the market for really good ideas, the private benefits of one really good idea...
12. In the market for really good ideas, the private benefits of one really good idea (from speaker's fees, book sales, etc.) is $1 million, the social benefits of that idea is $1 billion, then: A. The good idea has external benefit, government should use tax to compensate for the externality. B. The good idea has external benefit, government should use subsidy to compensate for the externality. C. The good idea has external cost, government should use tax to compensate...
Supply Social (Private costs + External costs Supply Internal (private Costs) Demand Internal 67 80 Quantity...
Supply Social (Private costs + External costs Supply Internal (private Costs) Demand Internal 67 80 Quantity of packs of cigarettes measured in millions a. What is the equilibrium price and quantity if this is an unregulated market? b. What is the external cost? (Assume the external cost is the same along the the supply curve) c. What would be an appropriate solution for the government to mitigate this market failure? Be specific d. What would be the outcome of the...
1. (100) In a market for dry cleaning services, the marginal benefits from using dry cleaning...
1. (100) In a market for dry cleaning services, the marginal benefits from using dry cleaning services are ??( = 100 ā ?, and the private marginal cost of producing those dry cleaning services is given by ??( = 10 + ?. Pollution created by the dry cleaning process creates external damages that are given by the equation ??-./ = ?, giving social marginal costs of ??0 = 10+2?. (a) In the same graph, graph private and social marginal benefits...
2. If there are external costs from production, we can assume that A. the market supply curve also respresents the marginal social cost (MSC) curve. B. producer surplus exceeds consumer surplus. C. the market supply curve also represents the marginal external cost (MEC) curve. D. social costs of production exceed private costs of production.
1. Individual A and B have the following marginal benefits for private good X: MBA = 10 - XA MBg = 10 - XB While the cost of producing each unit is 2 dollarsyi.e., MC = 2). You are asked to: a. On a graph, find the market demand function for private good X (hint: make sure to label the angles, elbows, and corners as needed). b. Find the market equilibrium. e. Find consumer A quantity demanded, and consumer B...
S2 Si D2 Dr 0 Quantay Assume D1 reflects private benefits from consumption and assume S1 reflects private costs of production. If we begin with demand curve D1 and supply curve S1 in the figure above and external costs are incorporated into this market, then government should subsidize its production and shift supply from S1 to S2 the vertical distance between S1 and S2 equals external costs. O price will increase from P1 to P4. Ounderproduction equals Q3 minus Q1....
3) Assume that the market for energy efficient window installations in San Diego is perfectly competitive. Quarterly inverse supply and inverse demand are: P 1200 3Q (Private MB) P 440Qs (Private MC) neighbors (lowering the overall price of electricity, reducing pollution, and so on) These external benefits to consumers are estimated to be EMB 2Q (the more windows installed, the more external benefit to installing more windows). a) Find the equilibrium price and quantity that will be produced in a...
QUESTION 21 Compared with the efficient outcome, the market price of a good that generates external benefits is too high too low O optimal O equal to the efficient price QUESTION 22 Products that create external benefits are over-consumed because the private benefits exceed the private costs under-consumed because consumers only consider the private benefits of consumption O optimally consumed as long as private benefits equal private costs O underconsumed because the social costs exceed the social benefits
12. In the market for really good ideas, the private benefits of one really good idea (from speaker's fees, book sales, etc.) is $1 million, the social benefits of that idea is $1 billion, then: A. The good idea has external benefit, government should use tax to compensate for the externality. B. The good idea has external benefit, government should use subsidy to compensate for the externality. C. The good idea has external cost, government should use tax to compensate...
Supply Social (Private costs + External costs Supply Internal (private Costs) Demand Internal 67 80 Quantity of packs of cigarettes measured in millions a. What is the equilibrium price and quantity if this is an unregulated market? b. What is the external cost? (Assume the external cost is the same along the the supply curve) c. What would be an appropriate solution for the government to mitigate this market failure? Be specific d. What would be the outcome of the...
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