valuate the following statement: "When it comes to public goods, individuals do not reveal their true preferences because it is not in their self-interest to do so."
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Evaluate the following statement: "When it comes to public goods, individuals do not reveal their true preferences because it is not in their self-interest to do so."
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- An externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives any compensation for that effect. If the impact on the third party is beneficial, it is called a externality. The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. Adjust one or both of the curves to reflect the presence of the externality. If the social cost of producing the good is not equal to the private cost, then you should drag the supply curve to reflect the social costs of producing the good; similarly, if the social value of producing the good is not equal to the private value, then you should drag the demand curve to reflect the social value of consuming the good. (?) PRICE (Dollars per unit) QUANTITY (Units) Supply Demand ¦ þ Demand SupplyAn externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives any compensation for that effect. If the impact on the third party is adverse, it is called a externality. The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. Adjust one or both of the curves to refiect the presence of the externality. If the social cost of producing the good is not equal to the private cost, then you should drag the supply curve to reflect the social costs of producing the good; similarly, if the social value of producing the good is not equal to the private value, then you should drag the demand curve to reflect the social value of consuming the good. -O- Supply Demand Supply Demand QUANTITY (Unts) With this type of externality, in the absence of government intervention, the market…ECONOMICS Please Show Your Work With an Explanation This problem set explores what happens to pricing when we add network effects, which are a specific form of positive externality. You’ve invented a 3D fax machine. This cool technology is almost like a Star Trek teleporter. You can scan an object at one machine, which creates an exact copy at another 3D fax machine. It is so valuable that as more people use it, it becomes more valuable, and the price any given user is willing to pay increases in turn. Consider a scenario in which there are 12 possible users, who each value the fax machine at i*n, where i is the index of that user (from 1 to 12), and n is the number of other purchasing users. So, if no one buys the 3D fax machine, everyone values it at 0. However, as soon as one person buys the device, then the 12 possible users begin to value the product at 1, 2, … 12, respectively. If 2 people purchase, the 12 possible users’ valuations increase to 2, 4, … 24, and so on. Because…
- In writing about the increased popularity of national parks in the United States, such as Yosemite, Yellowstone, and the Grand Canyon, environmental economist Margaret Walls wrote: When one person's visit to a park doesn't appreciably diminish the experience for others, the fee to use the park should be zero. That doesn't apply when the public good starts to experience congestion problems...the Park Service should...[charge] a significantly higher fee at the most popular parks during the summer months. Source: Margaret A. Walls, "Protecting Our National Parks: Entrance Fees Can Help," Resources, No. 193, Fall 2016. Are Yosemite and other national parks public goods? Briefly explain. A. Yes, they are public goods because national parks such as Yosemite are common resources that are often overused. B. No, Yosemite and other national parks are not public goods when congestion diminishes others' enjoyment of them. C. No, Yosemite and other national parks are not public goods because the…Use the following diagram of the market for product X to answer the question below. Price Q₁ Qo Q₂ Quantity D₁ Curve S, embodies all costs (including externalities) and D, embodies all benefits (including externalities) associated with the production and consumption of X. Assuming the market equilibrium output is Q₁, we can conclude that the existence of external A) costs has resulted in an underallocation of resources to X. B) costs has resulted in an overallocation of resources to X. C) benefits has resulted in an overallocation of resources to X. D) benefits has resulted in an underallocation of resources to X.Bill’s demand for hamburgers (a private good) is Q = 21 − 6P and Ted’s demand is Q = 6 − 3P. Write down an equation for the social marginal benefit of the consumption of ham- burger consumption. Now suppose that hamburgers are a public good. Write down an equation for the social marginal benefit of hamburger consumption.
- Subway rides during rush hour The subway system in your city is approximately in equilibrium. Given current schedules, riders don't wait long for a train. Platforms are busy but not overcrowded. In other words, rush-hour fares are such that the quantity of rides supplied is about equal to the quantity demanded. The directors of the system now come up with an idea to get more people out of their cars and into the trains. Each time a rider buys a ride, 50 cents will be automatically deposited into the rider's bank account. The funding for this subsidy is to come from diverting a portion of gasoline taxes now paid by motorists. If this scheme works to increase ridership, the system is ready to provide more rides and to adjust fares as needed to keep the system in approximate equilibrium. When the plan goes into effect, what is likely to happen in the diagram above? Select one: O a. D will increase, resulting in more rides at a higher fare. O b. S will increase, resulting in more rides at…2 of 3 The accompanying diagram shows the demand and supply curves for taxi rides in New York City. Uber's entry into the market reduces the quantity of rides demanded from taxis at every price. On the accompanying graph, shift the demand curve to accurately represent the change in demand. Then, move point E₁ to the new equilibrium point. The unlabeled point is to help you answer the next question and is not movable. Assume that New York City politicians respond by imposing a regulated price of $2.50 per mile. Calculate consumer surplus, producer surplus, and total surplus for the taxi market after Uber has entered the market. Consumer surplus: $ 750 Producer surplus: $ 600 Total surplus: $ 1350 million million million Price ($ per mile) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 0 2.50 1.30 Market for Taxi Rides in NYC D 240.00 S 600.00 120 240 360 480 600 720 840 960 1,080 1,200 Quantity of taxi rides (millions of miles)QUESTION 1 Consider the market for fast food. Suppose the demand for fast food is given by QD=6-P where P is the price of an item (a burger, say) in dollars. Also suppose the supply is given by QS=P. The equilibrium price in this market is The equilibrium quantity of fast food is Fast food produces a lot of waste in all of the packaging that goes along with it when taken to go. This waste produces negative externalities - the private cost of consuming fast food (it's price) is less than the marginal social cost, which includes the cost of having to dispose of the waste. Suppose that the additional cost to society from each item of fast food produced is 0.5 dollars. In this case, the socially efficient quantity of fast food is
- Identify at least one positive and negative externality from running a hamburger shop. What is one example of how an externality could affect the price of your hamburger?How is the increase in post-secondary education (e.g. positive externality) going to effect consumer behavior in the future?Because the free market (competitive) equilibrium maximizes social efficiency, why would the government ever intervene in an economy?