【正文】 ll lead to the same reduction of quantity and change in the prices producers receive or consumers pay.Figure 1022. a. Fire extinguishers exhibit positive externalities in consumption because even though people buy them for their own use, they prevent fire from damaging the property of others. b. Figure 102 illustrates the positive externality from fire extinguishers. Notice that the social value curve is above the demand curve.c. The market equilibrium level is denoted Qmarket and the efficient level of output is denoted Qoptimum. The quantities differ because in deciding to buy fire extinguishers, people don39。t account for the benefits they provide to other people.d. A government policy that would result in the efficient oute would be to subsidize people $10 for every fire extinguisher they buy. This would shift the demand curve up to the social value curve, and market quantity would increase to the optimum quantity.3. Charitable organizations are most often organized to deal with externalities. By letting charitable contributions be deductible under the federal ine tax, the government provides a tax subsidy to charity, thus encouraging private solutions to the externality. People can give to the organization that they feel provides the most benefit to society, so the tax subsidy may be more effective than if the government itself tried to solve the externality. For example, churches may be better at helping the needy than government welfare programs.4. a. The externality is noise pollution. Ringo’s consumption of rock and roll music affects Luciano, but Ringo doesn’t take that into account in deciding how loud he plays his music. b. The landlord could impose a rule that music couldn’t be played above a certain decibel level. This could be inefficient because there would be no harm done by Ringo playing his music loud if Luciano isn’t home. c. Ringo and Luciano could negotiate an agreement that might, for example, allow Ringo to play his music loud at certain times of the day. They might not be able to reach an agreement if the transactions costs are high or if bargaining fails because each holds out for a better deal.5. If the Swiss government subsidizes cattle farming, it must be because there are externalities associated with it. Since tourists e to Switzerland to see the beautiful countryside, encouraging farms, as opposed to industrial development, is important to maintaining the tourist industry. Thus farms produce a positive externality by keeping the land beautiful and unspoiled by development. The government39。s subsidy thus helps the market provide the optimal amount of farms.6. a. The market for alcohol is shown in Figure 103. The social value curve is below the demand curve because of the externality from increased motor vehicle accidents caused by those who drink and drive. The freemarket equilibrium level of output is Qmarket and the efficient level of output is Qoptimum.b. The triangular area between points A, B, and C represents the deadweight loss of the market equilibrium. This area shows the amount by which social costs exceed social value for the quantity of alcohol consumption beyond the efficient level.Figure 1037. a. It39。s efficient to have different amounts of pollution reduction at different firms because the costs of reducing pollution differ across firms. If they were all made to reduce pollution by the same amount, the costs would be low at some firms and prohibitive at others, imposing a greater burden overall.b. Commandandcontrol approaches that rely on uniform pollution reduction among firms give the firms no incentive to reduce pollution beyond the mandated amount. Instead, every firm will reduce pollution by just the amount required and no more.c. Pigovian taxes or tradable pollution rights give firms greater incentives to reduce pollution. Firms are rewarded by paying lower taxes or spending less on permits if they find methods to reduce pollution, so they have the incentive to engage in research on pollution control. The government doesn39。t have to figure out which firms can reduce pollution the most190。it lets the market give firms the incentive to reduce pollution on their own.8. a. If the government knew the cost of reduction at each firm, it would have Acme eliminate all its pollution (at a cost of $10 per ton times 100 tons = $1,000) and have Creative eliminate half of its pollution (at a cost of $100 per ton times 50 tons = $5,000). This minimizes the total cost ($6,000) of reducing the remaining pollution to 50 tons.b. If each firm had to reduce pollution to 25 tons (so each had to reduce pollution by 75 tons), the cost to Acme would be 75 x $10 = $750 and the cost to Creative would be 75 x $100 = $7,500. The total cost would be $8,250.c. In part a, it costs $6,000 to reduce total pollution to 50 tons, but in part b it costs $8,250. So it39。s definitely less costly to have Acme reduce all its pollution and have Creative cut its pollution in half. Even without knowing the costs of pollution reduction, the government could achieve the same result by auctioning off pollution permits that would allow only 50 tons of pollution. This would ensure that Acme reduced its pollution to zero (since Creative would outbid it for the permits) and Creative would then reduce its pollution to 50 tons.9. a. An improvement in the technology for controlling pollution would reduce the demand for pollution rights, shifting the demand curve to the left. Figure 104 illustrates what would happen if there were a Pigovian tax, while Figure 105 shows the impact if there were a fixed supply of pollution permits. In both figures, the curve labeled D1 is the original demand for pollution rights and the curve labeled D2 is the new demand for pollution rights after the improvement in technology.Figure 104Figure 105b. With a Pigovian tax