Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 17, Problem 4SPA
To determine
Total tax revenue.
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My Child, My Choice
If all U.S. children were vaccinated many lives would be saved,
infections would be down, and medical costs would be lower.
Vaccinations protect not only the kids that receive the shots but also
those who can't receive them.
Source: Time, June 2, 2008
Draw a graph to illustrate the private market for vaccinations and show
the deadweight loss.
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Draw a demand and marginal benefit curve.
Label it D = MB.
Draw a supply and marginal cost curve.
Label it S= MC.
As the quantity of vaccinations increases, the marginal external benefit
from each vaccination decreases. Draw a marginal social benefit curve.
Label it MSB.
Draw a point at the market equilibrium. Label it 1.
Draw a point at the efficient equilibrium. Label it 2.
Draw a triangle that shows the deadweight loss. Label it DWL.
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Quantity (millions of flu shots per season)
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The graph below shows the supply and demand curves for beer.
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Demand
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Supply
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24. What is the size of consumer surplus when there is no government price control?
25. What is the size of producer surplus when there is no government price control?
26. What is the size of social surplus when there is no government price control? What is the
size of deadweight loss when there is no government price control?
27. What is the size of consumer surplus when Price Floor of $9 is imposed?
Price of beer
2.
What exactly is a Pigovian tax? Give some instances of how the Pigovian tax can be used to tackle environmental issues.
Chapter 17 Solutions
Macroeconomics
Ch. 17.1 - Prob. 1RQCh. 17.1 - Prob. 2RQCh. 17.2 - Prob. 1RQCh. 17.2 - Prob. 2RQCh. 17.2 - Prob. 3RQCh. 17.2 - Prob. 4RQCh. 17.3 - Prob. 1RQCh. 17.3 - Prob. 2RQCh. 17.3 - Prob. 3RQCh. 17.4 - Prob. 1RQ
Ch. 17.4 - Prob. 2RQCh. 17.4 - Prob. 3RQCh. 17.4 - Prob. 4RQCh. 17 - Prob. 1SPACh. 17 - Prob. 2SPACh. 17 - Prob. 3SPACh. 17 - Prob. 4SPACh. 17 - Prob. 5SPACh. 17 - Prob. 6SPACh. 17 - Prob. 7SPACh. 17 - Prob. 8SPACh. 17 - Prob. 9SPACh. 17 - Prob. 10APACh. 17 - Prob. 11APACh. 17 - Prob. 12APACh. 17 - Prob. 13APACh. 17 - Prob. 14APACh. 17 - Prob. 15APACh. 17 - Prob. 16APACh. 17 - Prob. 17APACh. 17 - Prob. 18APACh. 17 - Prob. 19APACh. 17 - Prob. 20APACh. 17 - Prob. 21APACh. 17 - Prob. 22APACh. 17 - Prob. 23APACh. 17 - Prob. 24APACh. 17 - Prob. 25APACh. 17 - Prob. 26APACh. 17 - Prob. 27APACh. 17 - Prob. 28APACh. 17 - Prob. 29APACh. 17 - Prob. 30APA
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- Some economists argue that early child care generates an external benefit to society. Consider the following supply-and-demand graph for early childhood education. A. How does the market equilibrium differ from what is best for society? B. If the government was going to provide a per-unit subsidy in this market in order to achieve the socially optimal outcome, how large of a subsidy would the government ne to provide? C. How much in total would the government need to spend in this market each month to achieve a socially optimal outcome? Price ($ per month) Supply $1,300 $1,200 $1,000 $900 Marginal social benefit Marginal private benefit (demand) 23 26 Quantity (millions per month)arrow_forwardK The graph illustrates the market for cotton Suppose that the coton growers use a chemical to control insects and waste flows into the town's river. The marginal social cost of producing the cotton is double the marginal private cost If no one owns the river and the two takes no action to control the waste, what is the quantity of cotton and the deadweight loss created? CTD If no one owns the river, the quarsity of cotton produced is 60 tons a month. The deadweight loss is $month 300- 320- 280 240 200 140- 120- 80- 40 Price (dollars per ton) D 16 M ID 20 30 40 50 60 70 80 90 100 Quantity (ons par month) Q a Garrow_forwardConcept Question 5.11 The federal government often aids farmers through systems of price supports. Suppose that the government sets a price support of $6 per pound in the rice market. The graph on the right shows this situation. 10- The price of rice would be $ 5 per pound if there was no price support. In order to maintain the price support, the government will have to purchase 200 pounds of rice. 8- The cost of this program to the government is S $5 4- 2- D 300 400 500 Quantity of rice Price of ricearrow_forward
- Suppose that at market equilibrium, the marginal private benefit is $47 and the marginal social benefit is $84. The market equilibrium is at a quantity of 23 and the efficient quantity is 32. What is the value of the deadweight loss resulting from the underproduction of this good? Do not include the $ in your answer.arrow_forwardPrice (dollars per pound) 6.00 5.00- 4.00- 3.00- 2.00- 1.00- 0.00+ 4. 8. 12 16 20 Quantity (billions of pounds per year) The graph shows the market for apples. The government introduces a price support for apples and sets the support price at $4.50 a pound. because 1. With the price support, the quantity produced is O A. efficient; marginal benefit equals marginal cost O B. efficient, marginal cost is less than marginal benefit O C. inefficient; this market is always inefficient O D. inefficient; marginal benefit is less than marginal cost O E. inefficient, marginal cost is less than marginal benefit 2. lose and gain from the price support. O A. Consumers and taxpayers; farmers and the government O B. Taxpayers; farmers and consumers O C. Consumers and taxpayers; farmers O D. Farmers; consumers and taxpayers 3. The deadweight loss is $ billion. >>> Answer to 1 decimal place. 4. The outcome is O A. always fair unless consumers are richer than farmers O B. fair by the fair-result view of…arrow_forward"Take a moment to thank the voluntary PBS fundraisers. The British Broadcasting Corporation (BBC) is funded by something called the "license fee," a tax of $245 per year on every household that has a television." (quote from The Federalist, August 7, 2014) Which of these two broadcasting companies has a free-rider problem? And why? PBS has a free rider problem because only people who pay taxes can watch it. BBC has a free-rider problem because only people who have TV can watch it. PBS has a free-rider problem because only viewers who choose to contribute toward the cost of its service actually pay, while others free ride. BBC has a free-rider problem because it is being funded by a compulsory f that works like a tax.arrow_forward
- Suppose that at the current output level the marginal social cost of producing a good is greater than its marginal private cost, and that the marginal social benefit associated with production of the good is equal to its marginal private benefit. Which of the following government actions would most likely increase efficiency? a. Taxing the production of the good b. Taxing the production of substitute goods c. Giving tax rebates to people who purchase the good d. Subsidizing production of complementary goods e. Subsidizing consumption of the goodarrow_forwardThe graph illustrates the market for cotton. Suppose that the cotton growers use a chemical to control insects and waste flows into the town's river. The marginal social cost of producing the cotton is double the marginal private cost. If no one owns the river and the two takes no action to control the waste, what is the quantity of cotton and the deadweight loss created? If no one owns the river, the quantity of cotton produced is tons a month. 150- 125- 100- 75- 50- 25- 0- 0 Price (dollars per ton) S D 50 100 150 200 250 300 350 400 450 500 Quantity (tons per month)arrow_forwardUse the graph attached below as a starting point (either download it or print it out). Add curves, labels, etc. to this graph in order to show the following: 1. Show that this good has a $4/unit negative externality (external cost), such as pollution. 2. Shade the area that represents the Deadweight Loss (lost gains from trade) caused by the external cost. 3. Show a tax or subsidy wedge (whichever you think is appropriate) that will solve the problem of the external cost. 4. Show the socially optimal level of production that the Pigouvian tax or subsidy above will help the market to achieve. You may use software or pencil and paper to complete this graph. Upload it here when you are done.arrow_forward
- A) Figure 10-1 (above)- For the described negative externality, what is the market Price/Quantity combination without any efforts to correct the market? B) Figure 10-1 (above)- For the described negative externality, what will happen to the equilibrium price and quantity if the government imposes a tax to remedy the negative externality (don't use exact numbers)? C) For a negative externality, briefly explain why and how the governmentmay get involved in the market. In your response, provide an example (type of product or service).arrow_forwardSome economists claim that early child care generates an external benefit to society. Use the below graph to answer the following questions. Price ($ per month) Supply 1,300 1,200 1,000 900 Marginal Social Benefit 1. Marginal Private Benefit 23 26 Quantity (millions per month) What is the market equilibrium? What is the socially optimal outcome? How do they differ? a. b. The government is planning to provide a per-unit subsidy for child care to achieve the socially optimal outcome. How large should this subsidy be? с. How much is the total government subsidy each month to reach a socially optimal outcome?arrow_forwardPolicymakers are provided data about the private and social benefits of a good being sold in the market. Quantity Private MB ($) Social MB ($) 4 9. 5 4 7 6. 2 5 7 3 What is the size of the externality? If the externality is positive, enter a positive number. If negative, make it a negative number. Enter numeric value Given this data, policymakers must decide whether to address the associated externality with a subsidy or a tax. As their economic consultant, which of the two policy tools would you recommend? a subsidy a taxarrow_forward
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