8/9/2019 Problem Set 2 Completed
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ECON 213
2. ss$me yo$ are a policyma'er i! &as)i!+to! 0C. obbyists
#or t)e presc)oolers o#merica )ae p$t press$re o! t)eir
represe!taties to cap prices o! +ra)am crac'ers.
;o$ )ae bee! assi+!ed a positio! o! a !e* committee to st$dy t)e
impact o# a priceceili!+ o! +ra)am crac'ers.
;o$r T?E a S@>P@S or !eit)er created8 &)y8There will be a
shortae because consumer demand will be so hih that
producers will not be able to produce the amount demanded
due to a limitedamount of resources.
3. Poll$tio! is co!sidered by most a !e+atie e=ter!ality. Some
eco!omists *o$ld li'e tosee t)e costs o# t)ese b$rde!s i!corporated
i!to t)e price o# +oods t)at *e b$y. Aori!sta!ce si!ce coal #ire
po*er pla!ts i!crease emissio!s t)at co$ld pote!tially lead
toclimate c)a!+e t)ese eco!omists beliee t)at t)e price *e pay #or
electricity is !otade7$ately )i+) e!o$+). 0ra* a completely labeled
+rap) a!d ill$strate o! t)e +rap))o* m$c) )i+)er electricity prices
*o$ld be i# t)e #$ll costs o# electricity prod$ctio!*ere ta'e! i!to
acco$!t. ;o$ do !ot !eed to proide act$al !$mbersB rat)er s)o*
o!t)e price a=is *)ere t)e price *o$ld be be#ore t)e e=ter!ality is
co!sidered a!d t)e
price a#ter t)e e=ter!ality is i!cl$ded. &)at problems
mi+)t e=ist i! determi!i!+ t)is!e* e=ter!ality based price8!"raph
is on attached document# roblems would be fiurin out if people
would still purchase the same amount ofelectricity after
e%ternalities because a lot people have no other options& they
haveno other electricity provider of means of ac'uirin electricity.
(lso, does thee%ternailities create e%ternal cost or e%ternal
benefire for consumers and producers)
. -! t)e old days li+)t)o$ses *ere b$ilt alo!+ t)e coast to
pree!t s)ips #rom r$!!i!+a+ro$!d o! roc's i! $!#amiliar ports. y
s)i!i!+ a beam o# li+)t oer a port a!d
+$idi!+ s)ips a*ay #rom roc's t)ese ital b$ildi!+s red$ced t)e
ris' #or s)ip captai!sa!d *ere +e!erally co!sidered to be e=tremely
al$able reso$rces. C$rio$slyli+)t)o$ses *ere almost al*ays r$! a!d
mai!tai!ed by local +oer!me!ts. E=plai! i!eco!omic terms *)y priate
#irms *o$ld !ot r$! a li+)t)o$se. *ihthouses would be
considered public property and the total cost of the
overnment runnin them would be cheaper than if a private firm
ran the lihthouse.
Pa+e 2 o# 2
