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Chapter 13: Q.5 (page 315)

When residents in a neighborhood tidy it and keep it neat, there are a number of positive spillovers: higher property values, less crime, happier residents. What types of government policies can encourage neighborhoods to clean up?

Short Answer

Expert verified

The government might encourage the neighborhoods by making direct payments or lowering taxes.

Step by step solution

01

Content Introduction

Positive externalities are positive spill overs to third parties that did not purchase the item or service that supplied the externalities.

02

Content Explanation

The government can encourage people to clean up their communities by launching programmed that provide direct financing for the effort or tax breaks for those who actively participate in the clean-up effort. The government can also encourage local businesses to form a group that will pay for and manage neighborhood clean-up efforts.

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Most popular questions from this chapter

HighFlyer Airlines wants to build new airplanes with greatly increased cabin space. This will allow HighFlyer Airlines to give passengers more comfort and sell more tickets at a higher price. However, redesigning the cabin means rethinking many other elements of the airplane as well, like engine and luggage placement, and the most efficient shape of the plane for moving through the air. HighFlyer Airlines has developed a list of possible methods to increase cabin space, along with estimates of how these approaches would affect the plane's operating costs and ticket sales. Based on these estimates, Table 13.5 shows the value of R&D projects that provide at least a certain private rate of return. Column 1 = Private Rate of Return. Column 2 = Value of R&D Projects that Return at Least the Private Rate of Return to HighFlyer Airlines. Use the data to answer the following questions.

Private rate of returnValue of R&D
12%\(100
10%\)200
8%\(300
6%\)400
4%$500

a. If the opportunity cost of financial capital for HighFlyer Airlines is 6%, how much should the firm invest in R&D?

b. Assume that the social rate of return for R&D is an additional 2% on top of the private return; that is, an R&D investment that had a 7% private return to HighFlyer Airlines would have a 9% social return. How much investment is socially optimal at the 6% interest rate?

Suppose that Sony's R&D investment in digital devices has increased profits by 20%. Is this a private or social benefit?

Are the following goods non-rival in consumption?

a. slice of pizza

b. laptop computer

c. public radio

d. ice cream cone

What can government do to encourage the development of new technology?

Which of the following goods or services are nonexcludable?

a. police protection

b. streaming music from satellite transmission programs

c. roads

d. primary education

e. cell phone service
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