When a negative externality exists in a market, the cost to producers:
a.) is greater than the cost to society
b.) will be the same as the cost to society.
c.) will be less than the cost to society
d.) will differ from the cost to society, regardless of whether an externality is present
When a negative externality exists in a market, the cost to producers:
a.) is greater than the cost to society
b.) will be the same as the cost to society.
c.) will be less than the cost to society
d.) will differ from the cost to society, regardless of whether an externality is present
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The corresponding table shows the demand schedule and two supply schedules for a tire producer
| Price($) | Quantity Demanded (daily demand) | Quantity Supplied(if firms only consider private costs((Daily Supply) | Quantity Supplied (if firms consider both private costs and environmental pollution costs) (daily supply) |
| 60 | 110 | 70 | 50 |
| 80 | 100 | 80 | 60 |
| 100 | 90 | 90 | 70 |
| 120 | 80 | 100 | 80 |
| 140 | 70 | 110 | 90 |
| 160 | 60 | 120 | 100 |
a. Is there an externality associated with tires?
1.Yes, a positive externality.
2.Yes, a negative externality.
3. No.
b. At a price of $100/tire, 90 tires are demanded daily. At this price, how will society be affected environmentally if the producer is not required to account for environmental pollution costs and produces 90 tires?
1. Society is better off
2. Society is worse off
3. Society experiences no change
c. The socially efficient number of tires is .......than the number of tires that results from the market provision of the good.
1. higher
2. lower
3. the same as
