Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 12, Problem 3.5P
To determine
Externalities and market failure.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Identify at least one positive and negative externality from running a hamburger shop.
What is one example of how an externality could affect the price of your hamburger?
Explain the difference between a positive externality and a negative externality. Can both types of externalities result in market failure? Why or why not?
Consider the above graph. Is there an externality present in this market? If so, what kind?
No, there is no externality.
Yes, a negative externality.
Yes, a positive externality.
Chapter 12 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- If there are no externalities or market power and all markets are in equilibrium, what conclusions can we draw from this in economic theory?arrow_forwardGive an example of an externality. Explain how a tax or subsidy might be used to “correct” for the inefficiency of a market equilibrium in the presence of an externality.arrow_forwardUse the table below to answer the questions: A. Find the equilibrium price, assuming sellers ignore negative externalities. B. Find the equilibrium quantity, assuming sellers ignore negative externalities. C. Find the optimal price, including external costs. Find the optimal quantity, including external costs.arrow_forward
- Explain the concept of an externality. Explain and show graphically how externalities lead to market failure and an inefficient allocation of resources.arrow_forwardFrom CNN what news article represents an issue ragards to Externalities or that can be realted to externalities? Cite at least one source (News Article, Video, etc.) for any data. Explain: What is the Economic issue? (Describe the issue) What is the connection to Externalities? (positive, negative, policy) (Use Math, Graph or data to explain or support your idea) Explain how this affects the Economy (individual, industry, national or global)arrow_forwardAn externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives any compensation for that effect. If the impact on the third party is beneficial, it is called a externality. The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. Adjust one or both of the curves to reflect the presence of the externality. If the social cost of producing the good is not equal to the private cost, then you should drag the supply curve to reflect the social costs of producing the good; similarly, if the social value of producing the good is not equal to the private value, then you should drag the demand curve to reflect the social value of consuming the good. (?) PRICE (Dollars per unit) QUANTITY (Units) Supply Demand ¦ þ Demand Supplyarrow_forward
- In the past, some counties and countries have imposed taxes on sugar, saturated fats, and food made with those ingredients as a way to reduce consumption of those foods. Assume the government imposes a unit tax on all chocolate. Answer the following questions Is there an externality from consuming chocolate? Explain why or why not. Use a correctly labeled graph to show what happens in the market for chocolate as a result of the unit tax. On your graph, show the market equilibrium before and after the tax (i.e. show the equilibrium prices and quantities.) Show graphically what happens to consumer surplus and producer surplus after the tax (you may need a separate graph to show this.) Will consumers be able to shift this tax to sellers? If yes explain why/how. If no explain why not. Based on your answer to c, who will bear the incidence of this tax? Show this on a graph. How will consumers respond to the tax on chocolate? How will candy companies respond strategically to the tax on…arrow_forwardOffer an example of a good or service with a negative externality. What is the externality of the good or service you mentioned?arrow_forwardDraw a supply curve and describe the external factors that determine supply.arrow_forward
- What is an externality? Provide two examples each of positive and negative externalities.arrow_forwardDoes it make sense that accounting for the negative externality results in a higher price? Explain your answer. Does it make sense that accounting for the negative externality results in a lower quantity? Explain your answer.arrow_forwardThe figure below shows a market in which there is an externality. The curve S2 is parallel to S1. Areas in the figures are numbered. What type of externality is shown in the figure and why is it a problem in economics? Identify the market equilibrium and the social equilibrium in the figure. If the market were to move from the market equilibrium to the social equilibrium, indicate the area(s) that represent the change in consumer surplus, the change in producer surplus, the change for third parties, and the net effect on total surplus. Does total surplus rise or fall? What would be the amount of a per-unit tax needed to fix the externality?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning