All Questions
Tagged with externalities microeconomics
25 questions
1
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Why are public goods directly provided by the government while positive externalities are subsidized?
Public goods and goods with positive externalities are closely related. However, the policy solution to public goods generally seems to be the government provision of the good (e.g., national defense, ...
- 11
2
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1
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220
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Should firecrackers which disturb neighbours be a production externality or consumption externality?
I am given a question to plot supply-demand for firecrackers. Bursting firecrackers produce noise so we have plot the externality in the graph.
In the answer key, it is given that due to the noise, ...
- 225
1
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3
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136
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Positional externalities - Are marketing and higher education examples of market failure?
As Mankiw explains in chapter 10 of the latest edition of Economics (chapter 9 in the previous few, I believe).
Positional externalities lead to "a professional squash player getting the extra ...
- 405
1
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2
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1k
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Trying to understand externality
I am trying to understand about externality in simple words, the book is quite confusing. So I wanted to know how externality makes the demand curve or supply curve shift attached the below diagram ...
- 21
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1
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95
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What can be done when pigouvian taxes must be so high that black markets become viable?
The whole point of a pigouvian tax is to force producers to bear an extra cost equal to the total social cost of a good right? But, the problem this presents is, what if the social cost is very high? ...
- 125
2
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0
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49
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Solving for the efficient subsidy amount with an externality
I am dealing with a problem that is set up as follows: Actors A and B get utility from consumption ($c_i$) and disutility from safety measures ($s_i$), however their chance of getting sick is reduced ...
- 21
4
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1
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196
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Pigouvian tax equivalent to Coasian payments
Consider an economy with two goods, $x$ and $y$. Suppose person a's consumption of good $y$ imposes a negative externality on person b. Person a's utility maximisation problem is
$$\max_{x_a,y_a} \ ...
- 93
4
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1
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89
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Understanding an article in the BMJ about the sugar tax
The research paper Changes in soft drinks purchased by British households associated with the UK soft drinks industry levy: controlled interrupted time series analysis was examining the impact of the ...
- 143
2
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2
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120
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Optimal Price and Quantity of Externality
I am trying to solve the following question:
Let $h \geq 0$ represent a negative externality of a firm's production on one (representative) consumer. The consumer has a quasi-linear utility function ...
- 71
1
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1
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138
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Calculating optimal level of negative externality
I am trying to solve the following question(s):
Let $h \geq 0$ represent a negative externality of a firm's production on one (representative) consumer. The consumer has a quasi-linear utility ...
- 71
1
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1
answer
246
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I don't understand how a graph would look like for this situation
If there is a negative production externality of agriculture which is water wastage, and the government provides a 100% subsidy to the farmers so they can buy irrigation gadgets to reduce water ...
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1
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49
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Economic impact of employer ignorance to cliff effects?
Let's say an employee, Mike in Indiana, earns \$10.50 an hour. He gets a raise to \$13, but because he is no longer eligible for SNAP (food stamps), his net earnings actually go down. His wage has ...
0
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1
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50
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Optimizing Lagrangian Function Subject to 4 Input/Output Constraints:
The objective function:
$$\text{utility}=U\left(x_{c}, y_{c}\right)$$
subject to,
$x_{o}=f\left(y_{i}\right)$
$y_{o}=g\left(x_{i}, x_{o}\right)$
$x_{c}+x_{i}=x_{o}+x^{*}$
$y_{c}+y_{i}=y_{o}+y^{*}$
...
- 264
1
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2
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50
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Is there an externality if someone buys all stock of some merchandise?
Is there an externality if someone buys all stock of some merchandise? On one hand, if they buy all of everything and there's still demand then they've taken it away from other people. On the other ...
- 13
2
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2
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2k
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Providing subsidies affects Marginal Private cost but not Marginal Social Cost?
According to the theory that I'm seeing on the internet and in textbooks, when a government wants to correct underproduction due to a positive externality of production, they can decide to subsidize ...
- 205
3
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3
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953
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Is there really an "efficient equilibrium *price*" with externalities?
In the "Intro to Micro" approach to externalities, I've always felt uneasy as a teacher with the idea that there is something like an "efficient equilibrium" with a single "efficient price".
To keep ...
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-1
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1
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343
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How does social cost and social benefit work?
I am really lost right now. I have a test tomorrow and I am stressing out.
Whatever I look at for externalities, which could be my textbook, a website, notes from class, they all contradict each other....
- 1
4
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2
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600
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Is it right to derive social marginal benefit by adding individual prices instead of quantities?
I come across a lecture material on market functions and externalities that makes me quite confused. Here's the setup: Two stores are located next to each other. If one installs a camera system in ...
- 143
2
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2
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214
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Welfare status when a positive externality is subsidised
I was wondering if there is still welfare loss for example there is a positive externality in production of a good and the government decides to subsidise the good?
I think it does still have ...
- 21
1
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1
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784
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Who pays externalities?
Suppose the state raises taxes in order to internalise externalities. Doesn't the consumer have to pay the additional external costs then, because the prices are raised due to the taxes?
- 113
2
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0
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248
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Competitive prices, tax and lump sum cash transfer in case of externalities
An economy is made up of two people. The utility functions are
$$u_1(x_{11},x_{12}) = x_{11}x_{12}$$
$$u_2(x_{21},x_{22}) = 2x_{21} + 2x_{22} −x_{11}$$
The initial endowments are $ω_1 = (1,0)$ and $...
- 131
6
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2
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5k
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Pareto optimality with externalities
I'm reading the book "Economics of natural ressources and the environment" written by D. Pearce and R. Turner. They explain that the competitive equilibrium is not a Pareto optimum in case of (...
- 163
3
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1
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1k
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Externalities - First order conditions
I am currently reading the book "Microeconomics: Principles and Analysis" by Cowell on my own. I'm reading the externalities chapter, and i found an interesting example:
There are just two firms: ...
- 103
4
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1
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1k
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Negative consumer externality vs demerit good - what's the difference?
The example I was given for each was cigarettes.
What market may have negative consumer externalities but is not a market for a demerit good?
What is a type of demerit good that may not have a ...
- 370
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4
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1k
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Are billboards beneficial for the economy? Why?
Billboards cost money to make and don't really seem to significantly benefit anyone other than billboard-makers. A company c putting up billboards presumably increases profits from the resulting ...
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