Economics Today: The Macro View (19th Edition) (Pearson Series in Economics)
19th Edition
ISBN: 9780134478760
Author: Roger LeRoy Miller
Publisher: PEARSON
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Textbook Question
Chapter 5, Problem 2P
Suppose that repeated application of a pesticide used on orange trees causes harmful contamination of groundwater. The pesticide is applied annually in almost all of the orange groves throughout the world. Most orange growers regard the pesticide as a key input in their production of oranges.
- Use a diagram of the market for the pesticide to illustrate the implications of a failure of orange producers' costs to reflect the
social costs of groundwater contamination. - Use your diagram from part (a) to explain a government policy that might be effective in achieving the amount of orange production that fully reflects all social costs.
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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 private value), the supply of parks (the private cost of producing them), and the social value of parks, including both the private value and external benefits.
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Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.
a) What is meant by Pareto efficiency in economics? Explain.
b) List two examples of market failures that are relevant for environmental economics.
Chapter 5 Solutions
Economics Today: The Macro View (19th Edition) (Pearson Series in Economics)
Ch. 5 - Prob. 5.1LOCh. 5 - Prob. 5.2LOCh. 5 - Prob. 5.3LOCh. 5 - Prob. 5.4LOCh. 5 - Prob. 5.5LOCh. 5 - Prob. aFCTCh. 5 - Prob. bFCTCh. 5 - Prob. cFCTCh. 5 - Prob. dFCTCh. 5 - Prob. eFCT
Ch. 5 - Prob. 1CTQCh. 5 - Prob. 2CTQCh. 5 - Prob. 1FCTCh. 5 - Prob. 2FCTCh. 5 - Prob. 1PCh. 5 - Suppose that repeated application of a pesticide...Ch. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Prob. 5PCh. 5 - Prob. 6PCh. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - Prob. 10PCh. 5 - Prob. 11PCh. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22P
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- 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 private value), the supply of parks (the private cost of producing them), and the social value of parks, including both the private value and external benefits. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. (?) Supply (Private Cost) Market Equilibrium Socially Optimal Level Social Value Demand (Private Value) QUANTITY OF PARKS PRICE OF PARKSarrow_forwardSave The market price of insecticide is initially $10 per unit. To address a negative externality in this market, the government decides to charge producers of insecticide for the privilege of polluting during the production K process. A fee that fully takes into account the social costs of pollution is determined, and once it is put into effect, the market supply curve for insecticide shifts upward by $8 per unit. The market price of insecticide also increases, to $12 per unit. What fee is the government charging insecticide manufacturers? $ (Enter a numeric response using an integer.)arrow_forwardA developing country implements pollution laws for the first time. Initially, there are some relatively cheap ways to reduce pollution and results are easily evident. After twenty years, they've found that the more one reduces pollution, the higher the marginal benefit. the lower the marginal benefit. the lower the marginal cost.arrow_forward
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