Microeconomics: Principles for a Changing World Chapter 13- Externalities and pu
ID: 1113229 • Letter: M
Question
Microeconomics: Principles for a Changing World Chapter 13- Externalities and public goods-Chiang This is a 4-part Multiply Choice Question. Please if you do not intend to answer all parts please do not answer it. Thank you. Note: I have had several incorrect answers in Economics questions I have asked recently, so please make sure your answer is correct if you answer it. Thanks again.
Part C. The Coase theorem claims that, in the case of tobacco:
it does not matter who is given the property rights to the air, as long as the parties involved are allowed to bargain.
efficiency will occur only if smokers are given the right to smoke wherever they wish.
efficiency will occur only if victims are given the right to be free of a smoke-filled environment.
if victims are given the right to be free of a smoke-filled environment, then tobacco manufacturers will sell tobacco through underground markets.
Part D. Which of these is an example of consumers creating a negative externality?
Air traffic from a nearby airport reduces property values.
A tanker ship leaks oil into a harbor.
Litter is found in an area around a fast-food restaurant.
A fast-food restaurant fails to provide medical benefits to employees.
I have asked this question before and got different answers. Please make sure it is correct.
Part C. The Coase theorem claims that, in the case of tobacco:
it does not matter who is given the property rights to the air, as long as the parties involved are allowed to bargain.
efficiency will occur only if smokers are given the right to smoke wherever they wish.
efficiency will occur only if victims are given the right to be free of a smoke-filled environment.
if victims are given the right to be free of a smoke-filled environment, then tobacco manufacturers will sell tobacco through underground markets.
Part A. (Figure: Nail Polish Externalities) Based on the figure, S (MPC) represents the private supply curve of a particular type of nail polish, the manufacture of which is associated with the release of toxic chemicals into the atmosphere. Ss (MSC) includes the cost of that toxicity borne by others. What area represents the total externality cost of this nail polish? Ss (MSC) Sp (MPC) 02 Q Quantity C defc. The total externality cost is unknown. Cabet cabdcExplanation / Answer
A. Option 3 - abef
Total externality cost is measured at the private optimal (i.e. at point a where output is Q1). At point a, the social cost is at point b.
However the socially optimal output is Q2 (i.e. point e) where private cost is f.
The overall externality cost is difference of the two which is area abef that is the difference between social and private cost when output is increased from socially optimal to privately optimal.
B. Option 3- P2
Socially optimal price is where MSC = Demand. In this case, it will be P2.
C. Option 1- it does not matter who is given the property rights to the air, as long as the parties involved are allowed to bargain.
As long as parties are allowed to bargain, they will reach a pareto optimal solution.
D. Option 3 - Litter is found in an area around a fast-food restaurant.
When consumers buy food at the fast food restaurant, then they throw away the little around the restaurant. Hence it is the most appropriate option.