econ190 chapter10

Chapter 10
1.Give an example of a negative externality and an example of a positive
externality.
Example of negative externality: air pollution from a factory
The neighbor’s barking dog
Health risk to others form second-hand smoke
Example of positive externalities: being vaccinated against contagious diseases protects not only you, but people who visit the salad bar or produce section after you.
R&D creates knowledge others can use.
People going to college raise the population’s education level, which reduces crime and improves government.
2.Draw a supply-and-demand diagram to explain the effect of a negative
Figure 1 illustrates the effect of a negative externality. The equilibrium quantity provided by the market is Q market. Because of the externality, the social cost of production is greater than the private cost of production, so the social-cost curve is above the supply curve. The optimal quantity for society is Q optimum. The private market produces too much of the good, as Q market is greater than Q optimum.
3.In what way does the patent system专利制度help society solve an
externality外在problem?
The patent system helps society solve the externality problem from technology spillovers. By giving inventors exclusive use of their inventions for a certain period, the inventor can capture much of the economic benefit of the invention. In doing so, the patent system encourages research and technological advance, which benefits society through spillover effects.
4.List some of the ways that the problems caused by externalities can be
solved without government intervention解决不让政府干涉.
Corrective taxes are taxes enacted to correct the effects of a negative externality. Economists prefer corrective taxes over regulations as a way to
protect the environment from pollution because they can reduce pollution at a lower cost to society. A tax can be set to reduce pollution to the same level as a regulation. The tax has the advantage of letting the market determine the least expensive way to reduce pollution. The tax gives firms incentives to develop cleaner technologies to reduce the taxes they have to pay.
5.Imagine that you are a nonsmoker sharing a room with a smoker. According
to the Coase theorem, what determines whether your roommate smokes in the room? Is this outcome efficient? How do you and your roommate reach this solution?
Externalities外在的can be solved without government intervention政府干涉through moral codes and social sanctions, charities, merging firms whose externalities affect each other, or by contract.
6.What are corrective taxes? Why do economists prefer them over
regulations条例as a way to protect the environment form pollution?
Corrective taxes: a tax designed to induce private decision-makers to take account of the social costs that arise from a negative externality.
By contrast, when externalities are present, society also cares incentives to account for the presence of externalities and thereby move the allocation of resources closer to the social optimum. Thus, while corrective taxes raise revenue for the government, they also enhance economic efficiency.。