Question 1

Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50S1U1P1thS1S1P0 restored historic building entails the following:
• a private cost of $800,000;
• a private value of $650,000;
• a social value of $800,000.
-Refer to Scenario 10-2. Is there an externality associated with this market? If your answer is "Yes," is the externality positive or negative?

Accepted Answer

The answer of Scenario 10-2
The demand curve for restored historic...

Question 2

At any given quantity, the cost of the marginal seller is the height of the __________.

Accepted Answer

The answer of At any given quantity, the cost of...

Question 3

Scenario 10-3
Suppose the equation for the demand curve in a market is  , where  is the quantity demanded and  is the price. Also, suppose the equation for the supply curve in the same market is  , where  is the quantity supplied.
-Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What are the socially optimal quantity and price?

Accepted Answer

The answer of Scenario 10-3
Suppose the equation for the demand...

Question 4

​The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.

Accepted Answer

This is a widely accepted consensus among economists that mandating measles vaccines for all Americans (except those with compelling medical reasons) would have a net positive social benefit, as it would prevent outbreaks and ultimately save lives and reduce healthcare costs.

Question 5

Sheryl sits on her patio and plays her guitar while her neighbors are outside. Sheryl neither pays nor receives any compensation for playing her guitar. Under what condition does her guitar-playing give rise to a positive externality?

Accepted Answer

The answer of Sheryl sits on her patio and plays...

Question 6

Bruce engages in an activity that diminishes the well-being of Shawna. Bruce pays no compensation to Shawna for her loss in well-being. What specific term do economists use to describe this situation?

Accepted Answer

The answer of Bruce engages in an activity that diminishes...

Question 7

At any given quantity, the willingness to pay of the marginal buyer is the height of the __________.

Accepted Answer

The answer of At any given quantity, the willingness to...

Question 8

Briefly explain how research into new technologies gives rise to a positive externality.

Accepted Answer

The answer of Briefly explain how research into new technologies...

Question 9

Scenario 10-3
Suppose the equation for the demand curve in a market is  , where  is the quantity demanded and  is the price. Also, suppose the equation for the supply curve in the same market is  , where  is the quantity supplied.
-Refer to Scenario 10-3. What are the market equilibrium quantity and price?

Accepted Answer

The answer of Scenario 10-3
Suppose the equation for the demand...

Question 10

Does the phenomenon of externalities strengthen the argument that we should rely upon the "invisible hand" of the marketplace, or does it weaken that argument?

Accepted Answer

The answer of Does the phenomenon of externalities strengthen the...

Question 11

Scenario 10-2 The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50S1U1P1thS1S1P0 restored historic building entails the following: • a private cost of $800,000; • a private value of $650,000; • a social value of $800,000. -Refer to Scenario 10-2. Is there an external cost associated with the restoration of the 50^th historic building, or is there an external benefit? What is the amount of that external cost or external benefit?

Accepted Answer

The answer of Scenario 10-2
The demand curve for restored historic...

Question 12

​Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $20. Assuming no transaction costs, an efficient solution would be for Sophia to pay Gabriel $15 to not recline his seat.
​

Accepted Answer

An efficient solution would be where both parties are better off than they were before. In this scenario, Sophia values having a non-reclined seat more than Gabriel values reclining his seat. Therefore, Sophia can pay Gabriel an amount between $10 and $20 (in this case $15) to not recline his seat, creating a mutually beneficial outcome.

Question 13

Does the restoration of historic buildings create a positive externality or does it create a negative externality?

Accepted Answer

The answer of Does the restoration of historic buildings create...

Question 14

Does research into new technologies create a positive externality or does it create a negative externality?

Accepted Answer

The answer of Does research into new technologies create a...

Question 15

Scenario 10-3
Suppose the equation for the demand curve in a market is  , where  is the quantity demanded and  is the price. Also, suppose the equation for the supply curve in the same market is  , where  is the quantity supplied.
-Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What is the social cost of producing 30 units of the good?

Accepted Answer

The answer of Scenario 10-3
Suppose the equation for the demand...

Question 16

Scenario 10-3
Suppose the equation for the demand curve in a market is  , where  is the quantity demanded and  is the price. Also, suppose the equation for the supply curve in the same market is  , where  is the quantity supplied.
-Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What particular tax or subsidy would move the market to the social optimum?

Accepted Answer

The answer of Scenario 10-3
Suppose the equation for the demand...

Question 17

Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50S1U1P1thS1S1P0 restored historic building entails the following:
• a private cost of $800,000;
• a private value of $650,000;
• a social value of $800,000.
-Refer to Scenario 10-2. Is the market equilibrium quantity of restored historic buildings less than, equal to, or greater than 50?

Accepted Answer

The answer of Scenario 10-2
The demand curve for restored historic...

Question 18

Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50S1U1P1thS1S1P0 restored historic building entails the following:
• a private cost of $800,000;
• a private value of $650,000;
• a social value of $800,000.
-Refer to Scenario 10-2. Could the government impose a tax or provide a subsidy to move the market to the social optimum? If your answer is "Yes," should it be a tax or should it be a subsidy?

Accepted Answer

The answer of Scenario 10-2
The demand curve for restored historic...

Question 19

Scenario 10-2
The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50S1U1P1thS1S1P0 restored historic building entails the following:
• a private cost of $800,000;
• a private value of $650,000;
• a social value of $800,000.
-Refer to Scenario 10-2. Is the socially optimal quantity of restored historic buildings less than, equal to, or greater than 50?

Accepted Answer

The answer of Scenario 10-2
The demand curve for restored historic...

Question 20

Scenario 10-3
Suppose the equation for the demand curve in a market is  , where  is the quantity demanded and  is the price. Also, suppose the equation for the supply curve in the same market is  , where  is the quantity supplied.
-Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What is the equation of the social-cost curve?

Accepted Answer

The answer of Scenario 10-3
Suppose the equation for the demand...

Quiz 10: Externalities

At any given quantity, the cost of the marginal seller is the height of the __________.

​The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.

Sheryl sits on her patio and plays her guitar while her neighbors are outside. Sheryl neither pays nor receives any compensation for playing her guitar. Under what condition does her guitar-playing give rise to a positive externality?

Bruce engages in an activity that diminishes the well-being of Shawna. Bruce pays no compensation to Shawna for her loss in well-being. What specific term do economists use to describe this situation?

At any given quantity, the willingness to pay of the marginal buyer is the height of the __________.

Briefly explain how research into new technologies gives rise to a positive externality.

Does the phenomenon of externalities strengthen the argument that we should rely upon the "invisible hand" of the marketplace, or does it weaken that argument?

​Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $20. Assuming no transaction costs, an efficient solution would be for Sophia to pay Gabriel $15 to not recline his seat. ​

Does the restoration of historic buildings create a positive externality or does it create a negative externality?

Does research into new technologies create a positive externality or does it create a negative externality?

The majority of economists believe that the social benefit of mandating measles vaccines for all Americans (except those with compelling medical reasons) would exceed the social cost.

Sophia sits behind Gabriel on an airplane. Gabriel owns the right to recline his seat and values this right at $10. Sophia values a non-reclined seat in front of her at $20. Assuming no transaction costs, an efficient solution would be for Sophia to pay Gabriel $15 to not recline his seat.