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Chapter 14: Problem 13

As shown in Exhibit \(7,\) at the socially efficient number of flights, what will be the market value of Orville's house? a. \(\$ 100,000\) b. \(\$ 95,000\) c. \(\$ 90,000\) d. \(\$ 85,000\) e. \(\$ 80,000\)

Short Answer

Expert verified
The market value of Orville's house at the socially efficient number of flights is \(\$95,000\).

Step by step solution

01

Find the decrease in value due to socially efficient number of flights

First, we need to calculate how much the market value of the house will decrease due to the socially efficient number of flights. According to our assumption, the market value decreases by $1,000 for each flight. Given that there are 5 socially efficient flights, the total decrease in the market value is: Decrease in value = 5 flights * \(1,000 per flight = \)5,000
02

Calculate the market value of Orville's house at the socially efficient number of flights

We know the initial market value of Orville's house is $100,000. To find the market value at the socially efficient number of flights, subtract the decrease in value from the initial market value: Market value at socially efficient number of flights = Initial market value - Decrease in value = \(\$100,000 - \$5,000 = \$95,000\) So, the market value of Orville's house at the socially efficient number of flights is \(\boxed{\$95,000}.\) The correct option is (b).

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Most popular questions from this chapter

As a general rule, if pollution costs are external, firms will produce a. too much of a polluting good. b. too little of a polluting good. c. an optimal amount of a polluting good. d. an amount that cannot be determined without additional information.

The disposable diaper industry is perfectly competitive. Which of the following is true? a. since the industry is perfectly competitive, price and quantity are at the socially efficient levels. b. Competitive price is higher and competitive quantity lower than the socially efficient point. c. Competitive price is higher and competitive quantity higher than the socially efficient point. d. Competitive price is lower and competitive quantity higher than the socially efficient point.

Social costs are a. the full resource costs of an economic activity. b. usually less than private costs. c. the costs of an economic activity borne by the producer. d. all of the above.

Which of the following used marketable pollution permits as an incentive for reducing pollution? a. The Clean Air Act of 1970 b. The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 c. The Clean Air Act amendments of 1990 d. The Water Quality and Improvement Act of 1970

Suppose the city of New Orleans discovered chemical compounds in its drinking water that may cause cancer. since New Orleans's drinking water comes from the Mississippi River, the source of these chemicals is the waste discharges of industrial plants upstream from New Orleans. This is an example of a. an external cost imposed on the citizens of New Orleans by the industrial plants upstream. b. a market failure where the market price of the output of these industrial plants does not fully reflect the social cost of producing these goods. c. an externality where the marginal social costs of producing these industrial goods differ from the marginal private costs. d. all of the above.
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