Part 2 of 4The following diagram illustrates the situation in the dry cleaning market. The marginal social cost (Susc) of the pollutionrises as the quantity of items cleaned per week rises. In addition, there are two demand curves, one for a smaller city.Dg. the other for a larger city. DWhy does the social cost curve (Susc) have a different slope than the private cost curve (SMPC)?A. The marginal social cost of pollution is increasing at a faster rate than the marginal private cost of dry cleaningOB. The marginal social cost of dry cleaning declines as output increases.OC. The total social cost of dry cleaning increases as output increases.OD. The marginal private cost of dry cleaning increases as output increases.OE The marginal social cost of dry cleaning increases as output increases.Taxing Externalities 3What tax rate per item cleaned will achieve economic efficiency in the smaller city? $ (Enter your response roundedto two decimal places.)Price (dollars per item cleaned)18.0016.0014.00-12:00-10.00-8:00-6.00HW ScoreO Point4.002.00-0.00200 400Quantity ( Price (dollars per item cleaned)18.00-16.00-14.0012.00-10.00-8.00-6.00-4.00-2.00-0.000SMSCSUPCDD200 400 600 800 1000 1200 1400 1600 1800Quantity (items cleaned per week in 1000s)Q

Private Marginal benefit( PMB) refers to additional benefit a consumer receive when an additional…

Answered: Part 2 of 4 The following diagram…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 3PA

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In the Land of Purity, there is only one form of pollution, called gunk. Table 12.14 shows possible combinations of economic output and reduction of gunk, depending on what kinds of environmental regulations you choose. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the percentage reduction of gunk, and with the quantity of economic output on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between K and L, can you say which one is better and why? In the choice between K. and N, can you say which one is better, and why? If you had to guess, which choice would you think is move likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice L or M? Why?
Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Fe and Qe. On the graph, shade in the deadweight loss at the market output.
The rows in Table 12.7 show three market-oriented tools for reducing pollution. The columns of the table show three complaints about command-and-control regulation. Fill in the table by stating briefly how each market-oriented tool addresses each of the three concerns.
From an economic perspective, is it sound policy to pursue a goal of zero pollution? Why or why not?
Would environmentalists favor command-and-control policies as a way to reduce pollution? Why or why not?
Refer to Table 12.2. The externality created by the refrigerator production was 100. However, once we accounted for both the private and additional external costs, the market price increased by only 50. If the external costs were 100 why did the price only increase by 50 when we accounted for all costs?
A country called Sherwood is very heavily covered with a forest of 50,000 trees. There are proposals to clear some of Sherwoods forest and grow com, but obtaining this additional economic output will have an environmental cost from reducing the number of trees. Table 12.11 shows possible combinations of economic output and environmental protection. Sketch a graph of a production possibility frontier with environmental quality on the horizontal axis, measured by the number of trees, and the quantity of economic output, measured in corn, on the vertical axis. Which choices display productive efficiency? How can you tell? Which choices show allocative efficiency? How can you tell? In the choice between T and R, decide which one is better. Why? In the choice between T and S, can you say which one is better, and why? If you had to guess, which choice would you think is more likely to represent a command-and-control environmental policy and which choice is more likely to represent a market-oriented environmental policy, choice Q or S? Why?
Do market demand curves reflect positive externalities? Why or why not?
Is zero pollution an optimal goal? Way or why not?

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