Lecture 10: Theories of Market Failure
... spark catcher. In that case, it's more efficient to throw sparks than to install the spark catcher. Under Legal Rule 1, where the farmer has a legal right to compensation for damages, the railroad will choose to pay the damages instead of installing the spark catcher. Under Legal Rule 2, where the r ...
... spark catcher. In that case, it's more efficient to throw sparks than to install the spark catcher. Under Legal Rule 1, where the farmer has a legal right to compensation for damages, the railroad will choose to pay the damages instead of installing the spark catcher. Under Legal Rule 2, where the r ...
1) Two manufacturing firms, A and B, create pollution as a byproduct
... firm, if it is unable to trade, will have to reduce pollution by 45 units. What is the marketclearing price of permits (assuming perfect competition in the permit market)? What level of abatement does each firm engage in? Is this socially optimal? Why or why not? d. How many more permits should the ...
... firm, if it is unable to trade, will have to reduce pollution by 45 units. What is the marketclearing price of permits (assuming perfect competition in the permit market)? What level of abatement does each firm engage in? Is this socially optimal? Why or why not? d. How many more permits should the ...
Final F10 - UPenn Econ
... will never agree to drop our hamburgers off our plates. Taxing meat will do nothing but make our meat more expensive.” g. What does Mrs. Palin assume about the meat market? Show graphically. In this case does taxing meat make sense? (Clarification: Please continue to assume that Moran’s statement a ...
... will never agree to drop our hamburgers off our plates. Taxing meat will do nothing but make our meat more expensive.” g. What does Mrs. Palin assume about the meat market? Show graphically. In this case does taxing meat make sense? (Clarification: Please continue to assume that Moran’s statement a ...
Document
... rights of individuals. • If all endowments are divided over individuals and all rights need to be respected, then we seem to be back in the Negishi format, where there is no room from redistribution and uniqueness is lost • However, even under full respect of rights tax revenue needed for redistribu ...
... rights of individuals. • If all endowments are divided over individuals and all rights need to be respected, then we seem to be back in the Negishi format, where there is no room from redistribution and uniqueness is lost • However, even under full respect of rights tax revenue needed for redistribu ...
The quantity of pollution Q is
... A network externality exists when the value to an individual of a good or service depends on how many other people use the same good or service. Excludable: suppliers of the good can prevent people who don’t pay from consuming it. Rival in consumption: the same unit of the good cannot be cons ...
... A network externality exists when the value to an individual of a good or service depends on how many other people use the same good or service. Excludable: suppliers of the good can prevent people who don’t pay from consuming it. Rival in consumption: the same unit of the good cannot be cons ...
TRENT UNIVERSITY DEPARTMENT OF ECONOMICS Dr. M. Arvin
... decisions on the trade-off between holding bonds, which pay interest, and holding money, which is used to purchase goods and services. At the beginning of each month, the individual gets an income of Y and converts this costlessly to bonds. Over the course of the month, the individual makes n equal- ...
... decisions on the trade-off between holding bonds, which pay interest, and holding money, which is used to purchase goods and services. At the beginning of each month, the individual gets an income of Y and converts this costlessly to bonds. Over the course of the month, the individual makes n equal- ...
MULTIPLE CHOICE QUESTIONS 1. Refer to Figure 1. After a tax is
... (c) This exchange must be Pareto optimal because contributions to charities are tax deductible. (d) From this information there is no way to determine whether or not this exchange is Pareto optimal. 12. Assume the current interest rate is 25%. The present value of $1000 in one year would be (a) $180 ...
... (c) This exchange must be Pareto optimal because contributions to charities are tax deductible. (d) From this information there is no way to determine whether or not this exchange is Pareto optimal. 12. Assume the current interest rate is 25%. The present value of $1000 in one year would be (a) $180 ...
Lecture 7 10_20
... The incidence of the tax is determined by the relative slopes (or relative elasticity) of the demand and supply curves. A steep (relatively inelastic) demand curve means that buyers pay more of the tax. A shallow (relatively elastic) demand curve means that buyers pay less of the tax. ...
... The incidence of the tax is determined by the relative slopes (or relative elasticity) of the demand and supply curves. A steep (relatively inelastic) demand curve means that buyers pay more of the tax. A shallow (relatively elastic) demand curve means that buyers pay less of the tax. ...
Practice exam 2
... A) the marginal benefit of the last unit produced equals the marginal cost of producing that unit. B) the marginal benefit of the last unit produced is greater than the marginal cost of producing that unit. C) the marginal benefit of the last unit produced is less than the marginal cost of producing ...
... A) the marginal benefit of the last unit produced equals the marginal cost of producing that unit. B) the marginal benefit of the last unit produced is greater than the marginal cost of producing that unit. C) the marginal benefit of the last unit produced is less than the marginal cost of producing ...
Are You suprised ?
... input. Assume, for example, that the last dollar spent on labor produced an increase in output by MPL/w (where MPL denotes the marginal product of labor, and w – the wage rate), whereas the last dollar spend on capital entailed an increase in production by MPK/r (where, by analogy, MPK denotes margi ...
... input. Assume, for example, that the last dollar spent on labor produced an increase in output by MPL/w (where MPL denotes the marginal product of labor, and w – the wage rate), whereas the last dollar spend on capital entailed an increase in production by MPK/r (where, by analogy, MPK denotes margi ...
29 Public Choice _ Taxation
... -- Failure due to inefficiency from certain characteristics of the public sector. -- Special interests: small group trying to get specific outcomes. -- Rent: payment beyond what’s necessary to keep a resource supplied; securing favorable gov’t policies that result in rent (higher profit or income) t ...
... -- Failure due to inefficiency from certain characteristics of the public sector. -- Special interests: small group trying to get specific outcomes. -- Rent: payment beyond what’s necessary to keep a resource supplied; securing favorable gov’t policies that result in rent (higher profit or income) t ...
29 Public Choice
... -- Failure due to inefficiency from certain characteristics of the public sector. -- Special interests: small group trying to get specific outcomes. -- Rent: payment beyond what’s necessary to keep a resource supplied; securing favorable gov’t policies that result in rent (higher profit or income) t ...
... -- Failure due to inefficiency from certain characteristics of the public sector. -- Special interests: small group trying to get specific outcomes. -- Rent: payment beyond what’s necessary to keep a resource supplied; securing favorable gov’t policies that result in rent (higher profit or income) t ...
Taxes and equity
... society by producers Efficiency requires that producers/consumers pay the full cost of production/consumption ...
... society by producers Efficiency requires that producers/consumers pay the full cost of production/consumption ...
Taxes and subsidies
... 4. PRODUCER REVENUE: If no taxes were charged then the amount that consumers spend (consumer expenditure) would equal the amount producer’s receive (Producer revenue). However, with a tax imposed Producer revenue = consumer expenditure – government revenue 5. RESOURCE ALLOCATION: The quantity demand ...
... 4. PRODUCER REVENUE: If no taxes were charged then the amount that consumers spend (consumer expenditure) would equal the amount producer’s receive (Producer revenue). However, with a tax imposed Producer revenue = consumer expenditure – government revenue 5. RESOURCE ALLOCATION: The quantity demand ...
Choice, Change, Challenge, and Opportunity
... unless S or D is perfectly inelastic. What’s effect of tax on Consumer surplus Producer surplus Tax revenue Deadweight loss Excess burden of tax reduction in consumer & producer surplus minus tax revenue Identical to deadweight loss ...
... unless S or D is perfectly inelastic. What’s effect of tax on Consumer surplus Producer surplus Tax revenue Deadweight loss Excess burden of tax reduction in consumer & producer surplus minus tax revenue Identical to deadweight loss ...
Taxes and Housing Affordability Presentation by Dr
... NRAS • Introduced in 2008 to provide incentives to investors to build 50,000 affordable rental properties by 2012 • NRAS dwellings must be: ▫ New or substantially renovated dwelling ▫ Rented to eligible low & moderate income households for at least 20% below market rates for 10 years • Federal & St ...
... NRAS • Introduced in 2008 to provide incentives to investors to build 50,000 affordable rental properties by 2012 • NRAS dwellings must be: ▫ New or substantially renovated dwelling ▫ Rented to eligible low & moderate income households for at least 20% below market rates for 10 years • Federal & St ...
here - Career in Tax
... However, this argument neglects implicitly the general equilibrium price effects: if people save less because of capital taxes, capital stock may go down driving also the wages down and hurting workers. That is to say the capital tax might be shifted partly on workers. Up until now we have been disc ...
... However, this argument neglects implicitly the general equilibrium price effects: if people save less because of capital taxes, capital stock may go down driving also the wages down and hurting workers. That is to say the capital tax might be shifted partly on workers. Up until now we have been disc ...
Micro Chapter 4 Study Guide Questions 13e
... ____ 14. If there was an increase in the tax on cell phones, what would be the effect on the equilibrium price and quantity of cell phones? a. price increases, quantity decreases b. price decreases, quantity decreases c. price increases, quantity increases d. price decreases, quantity increases ___ ...
... ____ 14. If there was an increase in the tax on cell phones, what would be the effect on the equilibrium price and quantity of cell phones? a. price increases, quantity decreases b. price decreases, quantity decreases c. price increases, quantity increases d. price decreases, quantity increases ___ ...
Micro Chapter 4 study guide questions
... ____ 14. If there was an increase in the tax on cell phones, what would be the effect on the equilibrium price and quantity of cell phones? a. price increases, quantity decreases b. price decreases, quantity decreases c. price increases, quantity increases d. price decreases, quantity increases ___ ...
... ____ 14. If there was an increase in the tax on cell phones, what would be the effect on the equilibrium price and quantity of cell phones? a. price increases, quantity decreases b. price decreases, quantity decreases c. price increases, quantity increases d. price decreases, quantity increases ___ ...
MAKEUP2 -- Spring 2000.doc
... 1. Explain why markets generally produce more efficient outcomes than alternative means of allocating resources. ...
... 1. Explain why markets generally produce more efficient outcomes than alternative means of allocating resources. ...
Deadweight Loss
... The deadweight loss is the reduction in total surplus due to the tax. Tax revenue is the amount of the tax times the amount of the good sold. In panel (a), a small tax has a small deadweight loss and raises a small amount of revenue. In panel (b), a somewhat larger tax has a larger deadweight loss a ...
... The deadweight loss is the reduction in total surplus due to the tax. Tax revenue is the amount of the tax times the amount of the good sold. In panel (a), a small tax has a small deadweight loss and raises a small amount of revenue. In panel (b), a somewhat larger tax has a larger deadweight loss a ...
Problem Set 5
... c. Deterioration in the quality of the good. d. All of the above are potential impacts of an effective price ceiling. 3. Suppose that the supply of labour is perfectly elastic. Then a labour-saving invention, such as automatic teller machines in the banking industry, results in a a. a decrease in em ...
... c. Deterioration in the quality of the good. d. All of the above are potential impacts of an effective price ceiling. 3. Suppose that the supply of labour is perfectly elastic. Then a labour-saving invention, such as automatic teller machines in the banking industry, results in a a. a decrease in em ...
Pigovian tax
A Pigovian tax (also spelled Pigouvian tax) is a tax applied to a market activity that is generating negative externalities (costs for someone other than the person on whom the tax is imposed). The tax is intended to correct an inefficient market outcome, and does so by being set equal to the social cost of the negative externalities. In the presence of negative externalities, the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product. An often-cited example of such an externality is environmental pollution.In the presence of positive externalities, i.e., public benefits from a market activity, those who receive the benefit do not pay for it and the market may under-supply the product. Similar logic suggests the creation of a Pigovian subsidy to make the users pay for the extra benefit and spur more production. An example sometimes cited is a subsidy for provision of flu vaccine.Pigovian taxes are named after economist Arthur Pigou who also developed the concept of economic externalities. William Baumol was instrumental in framing Pigou's work in modern economics.