Chapter 5: Q. b (page 104)
Given that even the tiniest bit of fast-traveling space junk, such as a fleck of paint, can damage a satellite or pierce the thin covering of a spaceship why might the IADC Committee experience problems determining the "appropriate level of orbital pollution?
Yes.
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Could negative externalities from drone flights be addressed if it were
possible for people to negotiate prices at which drone owners would pay
explicit fees for the right to fly drones above people's properties?Explain
your reasoning
Many people who do not smoke cigars are bothered by the odor of cigar smoke. If private contracting is impossible and in the absence of any government involvement in the market for cigars, will too many or too few cigars be produced and consumed? From society’s point of view, will the market price of cigars be too high or too low?
Suppose that the U.S. government determines that cigarette smoking creates social costs not reflected in the current market price and equilibrium quantity of cigarettes. A study has recommended that the government can correct the externality effect of cigarette consumption by paying farmers not to plant tobacco used to manufacture cigarettes. It also recommends raising the funds to make these payments by increasing taxes on cigarettes. Assuming that the government is correct that cigarette smoking creates external costs, evaluate whether the study’s recommended policies might help correct this negative externality.
Based on your answer to Question 5-19, if the government aims to correct the positive externality in the inoculation market via a per-unit subsidy to consumers, in the wake of the study, is the appropriate per-unit subsidy higher or lower than before?
Suppose that, as part of an expansion of its State Care health system, a state government decides to offer a \(50 subsidy to all people who, according to their physicians, should have their own blood pressure monitoring devices. Prior to this governmental decision, the market-clearing price of blood pressure monitors in this state was \)50, and the equilibrium quantity purchased was 20,000 per year.
(a) After the government expands its State Care plan, people in this state desire to purchase 40,000 devices each year. Manufacturers of blood pressure monitors are willing to provide 40,000 devices at a price of $60 per device. What out-of-pocket price does each consumer pay for a blood pressure monitor?
(b) What is the dollar amount of the increase in total expenditures on blood pressure monitors in this state following the expansion of the State Care program?
(c) Following the expansion of the State Care program, what percentage of total expenditures on blood pressure monitors are paid by the government? What percentage of total expenditures is paid by consumers of these devices?
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