Microeconomics Assignment Example | Topics and Well Written Essays - 750 words

Microstintings - Assignment ExampleThese unplayfuls ar traded in the market where the buyer and seller starting line agree on a price level and then the buyer acquires the good. Thus, consumers have to pay for the good in order to acquire its benefits. Cars and cell ph iodins argon examples. In contrast, a public good is one that is available for tout ensemble and does not necessarily need to be acquired by paying for it. For example, street lights or a light house benefit either instead of one person. The growing in the figure of public goods by the government helps it to cut across the system of class disparity and allows everyone to benefit from them without real paying for the goods. The government hence produces public goods to increase the social welfare of the society. Ans 3) Private goods are paid for by the consumers in order to get ownership of the good. Thus, only the person buying it acquires all the benefits. However, the free rider concept comes into play when one entity much(prenominal) as the government is responsible for providing all the benefits that are equally shared by the people. An example of this can be bridges and roads that are used by everyone while the government builds them. Ans 4) The optimal quantity of pollution can neer be zero because any production activity in the economy makes pollution an unavoidable spillover effect. For instance, a car manufacturing company pass on cause air pollution and for an economy that is operating on a free market basis with no government intervention, even though the cost of the pollution will not be borne by the company, it will be a byproduct of that production process. Thus at any point, the optimal quantity of pollution can never be zero unless all forms of frugal activity are halted (Mankiw, 2002). Ans 5) Increasing the gas tax would have a number of unfortunate effects. Firstly, the cost of other goods will increase with the increase in gas tax. The automobile, aviation and shi pping sedulousness rely heavily on gas and will raise their prices in accordance to the increase in tax so that the costs can be covered. In addition to this, the purchase of automobiles will diminish since the gas tax would result in a higher(prenominal) cost of the car for the consumer. Secondly, the demand for gasolene is considered to be inelastic in the short run. This means that the gas consumption would not decrease with an increase in gas prices. Therefore, an increased gas tax would be a further strain on the costs of manufacturers and consumers. Also, this increase would be reflected on specifically the lower and middle income groups that own fewer vehicles than the higher income group. People in rural and remote areas depend on public transportation and thus a high gas tax would be unfair to the low income groups (OSullivan & Sheffrin, 2005). Ans 6) Pollution is defined as damage or harm caused to the environment that we live in. A pollution tax will thus reduce pollut ion by making large and small organizations to take responsibility for the pollution their economic activities cause. The revenue from these taxes can be used to take measures to eliminate the pollutants that are responsible for harming the environment. For instance, a carbon emission tax can allow the government to invest in projects that reduces industry pollution such as CCS (Carbon Capture and Storage). Moreover, a pollution tax will balance the pollution costs that many organizations may not incorporate in their production proces