ECON 1000 Lecture Notes - Lecture 21: Marginal Product, Externality, Fish Farming

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Econ1000 lecture 21 chapter 16: externalities (pt. ii) Government action in the face of external benefits. There are 3 main devices that the government can use to achieve a more efficient allocation of resources in the presence of external benefits are. Under public production, a public authority that receives payment from the government produces the good/service. A subsidy is a payment by the government to private producers. If the government pays the producer an amount equal to the marginal external benefit for each unit produced, the quantity produced is efficient. A voucher is a token that the government provides to households, which they can use to buy specified goods/services. Econ1000 lecture 21 chapter 17: public goods and common resources. Distinguish among private goods, public goods, and common resources. Understand how the free-rider problem arises and how the quantity of public goods is determined.

Related Questions

. Vouchers to Pay Private School
Tuition
Two conditions that justify government intervention in a market are the presence of external benefits and equity concerns. Both of these issues are present in the case of primary and secondary education in the United States. Think about what education without government education would look like. In the absence of government intervention, all primary and secondary education in the US would be private. Public school districts would not exist. Parents would need to pay private firms (schools) to educate their children.

External benefits

If all education were private, itâs likely that people would buy too little education, from societyâs point of view. External benefits are one reason. When a child is educated, he or she benefits and we expect his or her parents to take those benefits into account when they purchase education. But there are additional benefits to society which parents may ignore. As people become more educated, they are less likely to be unemployed or be criminals and are more likely to volunteer and vote. The presence of these external benefits is an example in support for the government getting involved in education.

Equity

Many families in the United States have low incomes. Among all children in first through twelfth grades in 2001, 46% were from families with incomes below $40,000. Since the cost of private education would be an important share of these familiesâ incomes, most Americans would be concerned about the fairness of relying on markets to decide how much education children receive. Current spending by these families on private education provides some support for this concern. Of all children in private school in 2001, only 25% were from families with incomes below $40,000. Therefore, equity concerns are another example in support for government getting involved in education.

Providing vs. producing education

Most economists think external benefits and equity concerns justify government intervention in education. But it is important to distinguish between government production of education and other forms of government intervention. At the level of elementary and secondary education, K- 12 education, government intervention today mostly means production of education by local school districts. To benefit, children must attend public schools. But this is not the only form intervention could take.
There are other markets where government intervention takes the form of subsidizing peopleâs access to productsâthink of financial aid to college students, for example. Many people in the US think that government should move from producing education to subsidizing access.

One form that subsidy could take is government providing vouchers to parents. Parents would use the voucher to help pay for their childâs education in a private school. After it receives the voucher, the school would turn it in and be paid by a local or state government.

Today there is a lively debate between people who think K-12 education should be delivered publicly and people who think quality and efficiency would be higher if government provided vouchers and the education was delivered by private schools. Some of these quality and efficiency arguments can be based on material we covered this week. Price competition between private schools will pressure each one to produce efficiently. Competition for students will lead private schools to offer programs of interest to parents and their children.

Answer the questions below and make use of the sources supplied. Be sure to cite you sources in your answers.

1. Explain whether a potential exit by students with vouchers will lead to the improvement of public schools. 2. Discuss whether the implementation of vouchers will lead the best students to leave public school, which could lead to a decline in education for the students left behind in the public schools. 3. Consider what might happen to the students who use vouchers to leave public schools in order to attend private schools. How might their academic performance change as a result of switching? 4. Finally, think about the impact of a voucher system on the students in an urban setting. Describe whether all families would have an equal opportunity to access education.

Your final product will be a paper that: ? Addresses each of the four questions above in total. ? Is APA formatted. ? The body is to be 2 pages minimum.

The requirements for your assignment are: 1. Answer each question fully 2. Define the overall subject of each question. 3. Cite at least three (3) resources from this weekâs materials.

Question 1:

The annual income that can be consumed without diminishing the total capital assets of a nation is

purchasing power parity income.

sustainable national income.

environmental capital stock.

per capita income.

Question 2:

Maintaining the rainforest is very important because

of its absorptive capacity for CO2 emissions.

of maintaining agricultural production of countries dependent on the rainforest such as Brazil.

ensuring a successful land reform policy.

encouraging rainforest settlement of the poor

Question 3:

Which of the following leads to an underallocation of resources to a specific economic activity?

Question 4:

The free-rider problem plagues public goods because

once public goods are produced it is not possible to exclude anyone from consuming these goods.

the public doesn't care about public goods.

public goods are not produced by profit-maximizing firms and hence can be produced only at a loss to society.

policymakers ignore opportunity costs in making decisions

Question 5:

Which of the following methods could be used to correct for external costs?

Require firms in the industry to install pollution control devices.

Impose a tax or an effluent fee on the offenders.

Have the offender clean up the pollution it caused.

All of the above would be appropriate.

Question 6:

To correct for a negative externality, a government might impose a uniform tax related only to the physical quantity of pollution if

the economic damages are zero.

the administrative costs are high.

the cost of ascertaining the actual economic costs are relatively small.

the economic damages associated with the pollution are different across different locations.

Question 7:

In order to internalize the externality due to pollution, the government should impose a tax based on

the size of the firm causing the pollution.

the physical amount of pollution.

the value of the pollution-causing business activity.

the economic damage associated with the pollution.

Question 8:

In a market for emission permits, firms that emit over their allowed limits

pay a price of these emissions.

are forced to shut down.

are taxed by the government for the amount of emissions.

receive a subsidy for the amount of emissions.

Question 9:

The 1997 Kyoto Protocol was signed by

more than three dozen nations.

all nations in the world.

only the United States and the European Union.

only nations in Asia.

Question 10:

The problem of overfishing in waters that are commonly owned can be solved by

subsidizing fishing.

establishing property rights for fishing in the waters.

the use of the Coase Theorem.

allowing the market to ration fish.

home / study / business / economics / questions and answers / Question 1 Which Of The Following Is The Best Example ... Question: Question 1 Which of the following is the best exam... Bookmark Question 1 Which of the following is the best example of a positive externality? A car company lays off 10,000 employees in order to cut costs. An individual drives a large SUV, which increases the amount of greenhouse gases in the atmosphere. An individual smokes in a restaurant, which bothers other patrons. A child is vaccinated against a disease, which reduces the probability that other children will catch the disease. 4 points Question 2 As a result of a negative externality, the market equilibrium quantity is too ______ compared to the socially optimal quantity. As a result of a positive externality, the market equilibrium quantity is too ______ compared to the socially optimal quantity. high; high. low; low. high; low. low; high. 4 points Question 3 Based on the diagram below, the deadweight loss area associated with the market equilibrium equals: Week06_graph1.jpg $10 $50 $80 $1,000 4 points Question 4 A firm's accounting profit is given by total revenue: less implicit costs. less explicit costs. less economic profit. less implicit and explicit costs. 4 points Question 5 Suppose an activity has a private cost equal to $30 and a private benefit equal to $30. The associated social cost equals $35 and the social benefit equals $30. Which of the following statements is true about this activity? There is a negative externality associated with this activity but not a positive externality. There is a positive externality associated with this activity but not a negative externality. There is both a positive and a negative externality associated with this activity. There is neither a positive nor a negative externality associated with this activity. 4 points Question 6 The Coase Theorem implies that: the efficient level of an externality is generally zero. private individuals living in market economies should not be concerned with externalities. government intervention is not always needed to arrive at the efficient level of an externality. government laws are unnecessary. 4 points Question 7 An industry in which a small number of large firms sell products that are either close or perfect substitutes is: perfectly competitive. monopolistically competitive. an oligopoly. a monopoly. 4 points Question 8 When a negative externality is present in a market: a tax can increase the level of economic surplus. the social benefits are greater than the private benefits. there is generally too little of the good produced by private markets. the government should ensure that there are zero external costs associated in all markets. 4 points Question 9 In the presence of a positive externality, the government can arrive at the socially optimal output level by: paying producers a subsidy equal to the amount of social benefits associated with the activity. charging producers a tax equal to the amount of social costs associated with the activity. paying producers a subsidy equal to the amount of external benefits associated with the activity. charging producers a tax equal to the amount of external costs associated with the activity. 4 points Question 10 The tragedy of the commons is that: too few individuals have access to high quality healthcare. common people overconsume public goods. the quality of life for lower income people is generally lower than that of higher income people. a resource with no price tends to be exploited until its marginal benefit falls to zero. 4 points Question 11 One potential remedy to the tragedy of the commons is to: never allow a single individual to consume more than one percent of the common resource. criminalize the usage of common resources. allow individuals to use a common resource as long as they receive some benefit from doing so. place a common resource under private ownership. 4 points Question 12 As a result of a positional externality: contestants have a tendency to invest in a series of mutually offsetting investments in performance enhancement. there is generally an underinvestment in performance enhancement. the market price of performance enhancement materials is too high. the quality of performance in competitive situations is lower than the socially optimal level. 4 points Question 13 Which of the following statements is true regarding health insurance? Economics shows that all health related procedures should be free to individuals because the health of an individual is priceless. Total economic surplus would be larger if individuals faced an incentive to only use services when the benefit exceeds their costs. Health maintenance organizations provide an incentive for doctors to prescribe expensive nonessential services. First dollar insurance coverage has likely had very little to do with rising healthcare expenditures since World War II. 4 points Question 14 A strategy that yields a higher payoff no matter what the other players in the game choose is known as a: prisoner's strategy. dominated strategy. dominant strategy. Nash strategy.

ECON 1000 Lecture Notes - Lecture 21: Marginal Product, Externality, Fish Farming

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