Social Inequality Case Study
BU224-01
November 23rd, 2010
HOMEWORK - UNIT 9
EXTERNALITIES & TAXES, SOCIAL INSURANCE, AND INCOME DISTRIBUTION
Chapter 19: Problems 1 and 5 on pages 472-474
Chapter 21: Problems 4 and 9 on pages 517-518
Chapter 19 / EXTERNALITIES /25
1.
a. Mrs. Chau plants lots of colorful flowers in her front yard.
What type of externality (positive or negative) is described? (2pts)
Positive externally.
Is the marginal social benefit of the activity greater than or equal to the marginal benefit to the individual? (1pt)
Mrs. Chau does not get as much satisfaction looking at the flowers as do people passing by, so the marginal social benefit is more for all of the people who enjoy them while the marginal benefit is less for Chau. …show more content…
Consequently, without intervention, will there be too little or too much (relative to what would be socially optimal) of this activity? (1pt)
The benefit of the neighborhood or society has been fulfilled and maximized to the extent she can plant less flowers.
b. Anna Crombie and Fritz, a popular clothing store, opens in a mall, attracting more shoppers who also visit other stores.
What type of externality (positive or negative) is described? (2pts)
Positive externality.
Is the marginal social benefit of the activity greater than or equal to the marginal benefit to the individual? (1pt)
Other stores are reaping the rewards from their store just as they are.
Is the marginal social cost of the activity greater than or equal to the marginal cost to the individual? (1pt)
The marginal social benefit is greater then the marginal benefit for Anna and Fritz.
Consequently, without intervention, will there be too little or too much (relative to what would be socially optimal) of this activity? (1pt)
With no intervention the store may go out of business.
c. The fraternity next to your dorm plays loud music, keeping you from
November 23rd, 2010
HOMEWORK - UNIT 9
EXTERNALITIES & TAXES, SOCIAL INSURANCE, AND INCOME DISTRIBUTION
Chapter 19: Problems 1 and 5 on pages 472-474
Chapter 21: Problems 4 and 9 on pages 517-518
Chapter 19 / EXTERNALITIES /25
1.
a. Mrs. Chau plants lots of colorful flowers in her front yard.
What type of externality (positive or negative) is described? (2pts)
Positive externally.
Is the marginal social benefit of the activity greater than or equal to the marginal benefit to the individual? (1pt)
Mrs. Chau does not get as much satisfaction looking at the flowers as do people passing by, so the marginal social benefit is more for all of the people who enjoy them while the marginal benefit is less for Chau. …show more content…
Consequently, without intervention, will there be too little or too much (relative to what would be socially optimal) of this activity? (1pt)
The benefit of the neighborhood or society has been fulfilled and maximized to the extent she can plant less flowers.
b. Anna Crombie and Fritz, a popular clothing store, opens in a mall, attracting more shoppers who also visit other stores.
What type of externality (positive or negative) is described? (2pts)
Positive externality.
Is the marginal social benefit of the activity greater than or equal to the marginal benefit to the individual? (1pt)
Other stores are reaping the rewards from their store just as they are.
Is the marginal social cost of the activity greater than or equal to the marginal cost to the individual? (1pt)
The marginal social benefit is greater then the marginal benefit for Anna and Fritz.
Consequently, without intervention, will there be too little or too much (relative to what would be socially optimal) of this activity? (1pt)
With no intervention the store may go out of business.
c. The fraternity next to your dorm plays loud music, keeping you from