Figure 9.9 shows the demand and supply of a product in a competitive market. FIGURE 9.9 $10 2 10 20 30 50 60 70 80 90 100 110 Quantity per period Refer to Figure 9.9 to answer the question. Suppose that this graph represents an industry with big external benefits and that the government wishes to increase its output by 10 units and raise its price. Which of the following will produce this result? Select one: O a. Granting a subsidy of $2 to producers. O b. Imposing an excise tax of $2. O C. Granting a subsidy of $2 to consumers. O d. Imposing an excise tax of $1. e. Granting a subsidy of $1 to producers.

Figure 9.9 shows the demand and supply of a product in a competitive market. FIGURE 9.9 $10 2 10 20 30 50 60 70 80 90 100 110 Quantity per period Refer to Figure 9.9 to answer the question. Suppose that this graph represents an industry with big external benefits and that the government wishes to increase its output by 10 units and raise its price. Which of the following will produce this result? Select one: O a. Granting a subsidy of $2 to producers. O b. Imposing an excise tax of $2. O C. Granting a subsidy of $2 to consumers. O d. Imposing an excise tax of $1. e. Granting a subsidy of $1 to producers.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 42P: Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the...

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Similar questions

Refer to Table 12.2. The externality created by the refrigerator production was 100. However, once we accounted for both the private and additional external costs, the market price increased by only 50. If the external costs were 100 why did the price only increase by 50 when we accounted for all costs?
A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwoods forest and grow com, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between T and R, decide which one is better. Why? In the choice between T and S, can you say which one is better, and why? If you had to guess, which choice would you think is more likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?
Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and output. a. Assuming that the production of televisions generates external costs, illustrate the effect of the producers being forced to pay a tax equal to the external costs generated, and indicate the equilibrium output. b. If instead of generating external costs, television production generates external benefits, illustrate the effect of the producers being given a subsidy equal to the external benefits generated, and indicate the equilibrium output.
Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Fe and Qe. On the graph, shade in the deadweight loss at the market output.
Suppose that Sonys R. Is this a private or social benefit?
What is a pollution charge and what incentive does it provide for a firm to take external costs into account?
Identify the following situations as an example of a negative or a positive externality: You are a birder (bird watcher), and your neighbor has put up several birdhouses in the yard as well as planting trees and flowers that attract birds. Your neighbor paints his house a hideous color. Investments in private education raise your countrys standard of living. Trash dumped upstream flows downstream right past your home. Your roommate is a smoker, but you are a nonsmoker.
Identify whether the market supply curve will shift right or left or will stay the same for the following: Films in an industry are required to pay a fine for their carbon dioxide emissions. Companies are sued for polluting the water in a river. Power plants in a specific city are not required to address the impact of their air quality emissions. Companies that use fracking to remove oil and gas from rock are required to clean up the damage.
In the Land of Purity, there is only one form of pollution, called gunk. Table 12.14 shows possible combinations of economic output and reduction of gunk, depending on what kinds of environmental regulations you choose. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the percentage reduction of gunk, and with the quantity of economic output on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between K and L, can you say which one is better and why? In the choice between K. and N, can you say which one is better, and why? If you had to guess, which choice would you think is move likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice L or M? Why?
What does a point inside the production possibility frontier represent?