a) Identify the factors that could contribute to a market failure in an economy and explain how a government could take measures to correct such market failure. b) "External costs and the external benefits are not taken into consideration by the producers". Explain graphically how this behavior of producers could lead to a market failure? c) Why do you think that a public goods should be provided only by the government? d) Explain how a government could allocate the burden of public goods provision among the
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- 1. For purposes of this question, note that pecuniary externalities are not typically considered to be a standard externality. The global supply of a popular chili sauce is largely or exclusively manufactured by one factory in California. a. Suppose that when this factory opened, it purchased a large tract of land and then began buying inputs like machines and peppers from nearby firms. Further suppose these purchases caused nearby land and housing values to increase, squeezing nearby renters. Is that increase an externality the way it is usually defined? In 1-2 sentences, why or why not? b. Production of this chili sauce uses large quantities of peppers, and suppose the factory installs a new ventilation system that emits particles from pepper processing to the neighborhood, causing neighbors’ eyes and throats to suffer, and then nearby home values fall. Is that decrease in home values an externality the way it is usually defined? In one sentence, why or why not?Explain how a government can use a tax on dry cleaning to bring about the efficient level of production. OA. The government can use a tax to decrease the marginal private benefit of consuming dry cleaning to equal the marginal social benefit. OB. The government can use a tax to decrease the marginal social cost of producing dry cleaning to equal the marginal private cost. OC. The government can use a tax to increase the marginal private cost of producing dry cleaning to equal the marginal social cost OD. The government can use a tax to increase the marginal private benefit of consuming dry cleaning to equal the marginal social benefit. OE. The government can use a tax to decrease the marginal private cost of producing dry cleaning to equal the marginal social cost What should the value of the tax be? The tax should be $ per unit (Enter your response rounded to two decimal places) How large is the deadweight loss (in dollars) from excessive dry cleaning, according to the figure? The…2. Suppose the Harrisonburg city council is concerned about the increase in crime in the city. Crimes in H'burg are inefficient in the sense that it costs society $20,000 more than the benefits to the criminal. If an offender is caught, tried and convicted they are sent to jail. Assume that the total social cost of trial, conviction, and punishment is $150,000 per criminal caught. The council is considering hiring additional police officers dedicated to detecting crime. This change would increase the fraction of offenders who are caught from 20% to 30%. The city estimates that this will decrease the number of crimes from 2,000 a year to either 1,200 or 1,600 per year. For each case: 1,200 or 1,600: For each question, make sure you justify your work and provide a clear explanation. a. What happens to the social cost of crimes committed? b. What happens to the cost of trying, convicting, and punishing offenders? c. What is the most that the city should be willing to pay for the new…
- 2. Suppose that emissions of sulfur dioxide are managed via a Cap-and-Trade policy. In this circumstance, how can an environmental group, such as Greenpeace, reduce emissions of this pollutant? Explain your answer. How would it effectively result in a reduction in emissions? What is the main obstacle for Greenpeace to achieve this? 3. Explain why a Cap-and-Trade program is more likely to be efficient than a standard. Be specific. 4. Explain why the firm’s MAC-curve is its demand curve for pollution permits.K What are the obstacles to achieving an efficient allocation of resources in the market economy? The obstacles to achieving an efficient allocation of resources in the market economy include OA. taxes and subsidies, externalities, monopoly, and public goods B. rising wage rates, technological advances, falling oil prices, and changes in preferences C. rising wage rates, externalities, technological advances, and common resources D. taxes and subsidies, falling oil prices, monopoly, and changes in preferences Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.3. An externality is a consequence of an economic activity experienced by unrelated third parties; it can be either positive or negative. Evaluate the positive externalities and the negative externalities through examples from the real life
- The government provides public goods because Select one: O a. private markets are incapable of producing these types of goods. O b. free-riders make it difficult for private markets to supply the socially optimal quantity. O c.external benefits will accrue to private producers. O d. markets are always better off with some government oversight.6. Climate change and externalities. How is the issue of climate change related to the concept of externalities? What is the externality? What are the relevant markets? b. Provide an example of a market that features this externality. Assuming there is no intervention to correct for the externality, compare the market allocation to the efficient allocation. Does the market produce too much? Too little? Is the market outcome efficient? а. c. What is the relationship between the marginal private cost of production in this market and the marginal social cost? Explain. d. Suppose you wanted to come up with an estimate of the magnitude of the marginal external cost (in dollars). What would this number represent? What sort of information would you need to determine this number?QUESTION 1 With negative externalities, the social cost includes a. public cost & opportunity cost O b. private cost & external cost Oc. external cost & opportunity cost Od. internal cost & private cost QUESTION 2 Assume the following: Social Cost = $150 . Private Cost = $125 What must the external cost equal? Oa. $275 O b. $25 O c. $0 O d. $150 QUESTION 3 Altering incentives so that people take into account the external effects of their actions is known as O a. changing the game O b. rigging the system Oc. internalizing the externality Od. stacking the deck QUESTION 4 Assume the following: market quantity> socially desirable The inequality above describes which of the following? Oa. Negative Externality Ob. Positive Externality Oc. Budget Deficit Od. Budget Surplus Assume the following: market quantity < socially desirable The inequality above describes which of the following? Oa. Budget Surplus O b. Positive Externality c. Budget Deficit O d. Negative Externality QUESTION 6 In order…
- Suppose electricity generates a negative externality in production. If so, then O A. the marginal social benefit of electricity is less than the marginal private benefit. O B. the marginal social cost of electricity equals the marginal private cost. Oc. the marginal social cost of electricity equals the marginal social benefit. O D. the marginal social cost of electricity is less than the marginal private cost. O E. the marginal social cost of electricity is greater than the marginal private cost.Write down a model of positive production externality with two firms, in which theproduction activities of one firm directly affects the production/cost of the other firm.State and explain the key assumptions of the model. Using the model, answer thefollowing questions:(a) Explain why the presence of a positive production externality could prevent therealisation of an efficient outcome.(b) Name a possible cure for the positive production externality and explain how itcould solve the inefficiency problem.Externalities: End of Chapter Problem In Chapter 6, we said that taxes create deadweight losses. When we tax goods with external costs, should we worry about deadweight losses? Why or why not? Any deadweight losses O should not conern us. Deadweight losses are the result of transactions that no longer occur and the problem with negative externalities is that too many transactions occur. O should concern us. If there is a negative externality associated with a good, the deadweight loss from a tax simply exacerbates society's welfare costs. from a tax are counter-productive. Why would we tax goods with negative externalities when the remedy for a negative externality is a subsidy? should concern us. Deadweight losses sound bad because they are bad; we should always avoid deadweight losses.