ECON 213 Problem Set ch. 7 Liberty University Solution

A city water district wants to encourage local businesses and homeowners to landscape with drought-tolerant plants. After disappointing results from a publicity campaign, the water district decides to subsidize local plant nurseries so they can offer the plants at a lower price.

Suppose the graph shows the supply and demand curves for a drought-tolerant plant, such as purple sage. Drag the appropriate curve to show the impact of the water district subsidy.

All jurisdictions in the United States have laws against drunk driving, with penalties ranging from lost driving privileges to jail time. But in many jurisdictions, establishments can also be held liable for selling alcohol to visibly intoxicated patrons who then cause accidents. In those locales, having drunk drivers on the road is a negative externality that both consumers and producers must internalize.

The effect on the supply and demand curves for alcoholic beverages is to shift both curves to the left: as drinkers moderate their intake, demand drops from D1 to D2, and as bars and liquor stores refuse service to drunk patrons, supply drops from S1 to S2. Which point on the graph represents the social optimum in this situation? Mark your answer using the point tool.

A city council decides to address the problem of disposable plastic shopping bags littering public places and clogging drainpipes. The council's solution is to ban the bags in stores, so customers must bring their own bags.

Suppose that the graph shows the supply and demand curves for a consumer good, such as frozen chicken, that would normally be carried in bags. Drag the appropriate curve to identify the impact of the city council's new shopping bag ordinance.

A study finds that the noise from lawn mowers is harmful; hence, the government imposes a $20 tax on the sale of every unit. This amount accurately accounts for the external cost of the noise pollution. Before the corrective tax, basic push mowers regularly sold for $190. After the tax is in place, the market price for basic push mowers rises to $205.

Because of the tax, the number of basic push mowers sold will

The socially optimal price of basic push mowers is

The private market price is

A firm selling basic push mowers receives after it pays the tax.

Use the following graph to identify the equilibrium at the social optimum (ES), the competitive market equilibrium (EM), the quantity produced at the social optimum (QS), and the quantity produced at the competitive market equilibrium (QM).

Please read the article below, and use the information in the article to answer this question.

Clearly establishing property rights for water ownership would result in which of the following?

Airport traffic is an example of a externality. One way to correct this problem is to impose a tax equal to the externality. This is why many cities have noise ordinances that impose fines and penalties for early-morning and late-evening disturbances than for disturbances at other times of the day.

Indicate whether the following activities create a positive externality, a negative externality, or neither.