ECON 101 Lecture Notes - Lecture 9: Deadweight Loss, Economic Equilibrium, Externality

21 views1 pages

ivoryweasel182

6 Jun 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

sangriahare462 and 5 others unlocked

ECON 101 Full Course Notes

Verified Note

30 documents

Document Summary

Positive externalities the unintended consequences are beneficial to others and are not included in the price: equilibrium results in too little of the product and too little of the external benefits. Social benefit the total benefit, including the benefit to buyers and the external benefit to third parties. External benefit the additional benefit to third parties arising from the external benefit. What to do about positive externalities: tax incentives. Tax incentives in the form of tax cuts motivate individuals and companies to do more than they otherwise would. Targeted to the exact behavior that creates the social benefit. What to do about positive externalities: direct provision. Public good a good that people cannot be excluded from using, even if they haven"t paid for it, and that continue to be available, even after prior use. Best provided by the government directly and financed by all through taxes.

Related Questions

Environmental policy and public goods focus on externalities in the context of producing goods and services, but like many concepts in our course, these ideas are very applicable to our daily lives.

1) Identify and describe a situation where you have experienced either a positive or negative externality.

2) State clearly what the external cost or benefit is.

3) Estimate the dollar value of the externality. You may not be sure how to do this, so consider asking yourself the following: If it's a positive externality, what is the highest price you would be willing to pay for the external benefit you received? If it's a negative externality, what is the lowest price you would be willing to accept as compensation for the external cost you are bearing?

4) Recommend either a tax or subsidy amount that the externality creator should pay or receive (to internalize the externality) based on the number of people affected. You may assume that everyone affected has the same valuation for the externality as you do.

beigemacaw847

Externalities are costs or benefits that are caused by producing or consuming a good but that are not included in the market price for the good. They are simply the unintended side effects of market activities. Externalities can be positive or negative. One example of a positive externality might be when beekeepers provide a means of pollination for fruit growers. Air, water, and noise pollution are examples of negative externalities.

Please answer the following questions to describe an instance in which you, an acquaintance, or family member has experienced an externality. Please use economic concepts, and use references in your main contribution.

How did it affect you (or your acquaintance or family member?) Please explain.

What were the effects? Please explain.

Did you (or your acquaintance or family member) experience increased or decreased health or quality of life? Please explain.

If you choose to write about a negative externality such as pollution, what do you think is the best way to reduce pollution? Please explain.

If you choose to write about a positive externality, what is the economic problem that positive externalities create? How would you resolve that? Please explain.

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 101 Lecture Notes - Lecture 9: Deadweight Loss, Economic Equilibrium, Externality

ECON 101 Full Course Notes

Document Summary

Get access

Related Documents

ECON 101 Lecture Notes - Lecture 14: Pigovian Tax, Externality, Social Cost

ECON 101 Study Guide - Final Guide: High Tech, Pigovian Tax, Coase Theorem

ECON 101 Chapter Notes - Chapter 16: Coase Theorem, Externality, Marginal Utility

Related Questions