70.2K

Verified Solution

Link Copied!

1. Identify whether each of the following is a private cost, a private benefit, a social cost, or a social benefit (only one). a. The enjoyment I receive from eating microwaved tuna casserole in my office b. The price I paid for the tuna casserole at the grocery store c. The awful smell of microwaved tuna casserole that my coworkers have to endure d. The price I paid for a pet mastiff e. The happiness I get from playing with my pet mastiff f. The increased neighborhood security caused by my pet mastiff 8. The terror all my neighbors feel whenever they step outside and see my pet mastiff In the following cases, the markets are in equilibrium, but there are externalities. In each case, determine whether there is an external benefit or cost and estimate its size. Finally, decide between a tax or a subsidy as a simple way to compensate for the externality. Fill out the table that follows with your answers. 2. a. In the market for automobiles, the private benefit of one more small SUV is $20,000 and the social cost of one more small SUV is $35,000. In the market for fashionable clothes, the marginal social benefit of one more dress per person is $100, and the marginal private benefit is $600. a. In the market for really good ideas, ideas that will dramatically change the world for the better, the private benefit of one more really good idea (from speaker's fees, book sales, patents, etc.) is $1 million. The marginal social benefit is $1 trillion

Answer & Explanation Solved by verified expert

See Answer