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Example of Marginal External Cost
A factory that manufactures paint releases chemical fumes into the atmosphere with each can of paint it produces. These fumes cause respiratory issues for residents in the nearby town, leading to increased healthcare expenses. The cost of these additional healthcare expenses per extra can of paint produced is the marginal external cost. This cost is 'external' because it is paid by the residents (a third party), not by the paint factory.
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Economics
Economy
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
CORE Econ
Social Science
Empirical Science
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A chemical plant produces industrial solvents. For each gallon of solvent produced, the plant incurs $10 in costs for labor and raw materials. The production process also releases waste into a nearby lake, which reduces the local fish population and costs the local tourism industry an estimated $4 in lost revenue for each gallon produced. What is the cost imposed on others from the production of one additional gallon of solvent?
Analyzing Costs of an Externality
Identifying External Costs in Production
A power plant emits pollutants that cause an estimated $500,000 in health and environmental damages to the surrounding community each year. Based on this information, the cost imposed on others by the production of one additional megawatt-hour of electricity is $500,000.
A factory's production process creates noise pollution that affects the local community. Match each type of cost associated with producing one more unit with its correct description.
Understanding Marginal External Cost
The cost imposed on parties not directly involved in a transaction when one more unit of a good is produced is known as the __________.
A paper mill situated on a river produces 1,000 tons of paper per month. This level of production creates water pollution that results in a total of $50,000 in damages per month to a downstream commercial fishery. If the mill were to produce one additional ton of paper, the estimated additional damage to the fishery would be $60. The cost for the mill itself to produce one more ton of paper is $200.
Which of the following values represents the cost imposed on others by the production of one additional ton of paper?
Calculating Marginal Damage from Production
Example of Marginal External Cost
Explaining an External Cost from Congestion
Marginal Social Cost (MSC) (Definition and Formula)
Marginal Social Cost (MSC) as the Sum of MPC and MEC
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A commercial flower farm uses a specific fertilizer to grow its roses. For each additional batch of roses grown, a certain amount of fertilizer runoff enters a nearby river, which is a primary source for a local bottling company that sells purified water. This runoff increases the purification costs for the bottling company. Which of the following best represents the marginal external cost of producing one additional batch of roses?
External Costs of Agricultural Production
Identifying External Costs of Air Travel
A software company offers its employees a free lunch every day. To provide this perk, the company's cafeteria generates a significant amount of food waste. For each additional employee hired, the cost of disposing of the extra food waste increases by $1. This $1 increase is an example of a marginal external cost.
Analyze each of the following economic activities. Match each activity to the statement that best describes the nature of the costs involved.
Constructing an Example of External Costs
A large-scale pig farm's operations create a strong odor that lowers the property values of neighboring homes. The decrease in property value for each additional pig raised represents a ____ for the community.
Evaluating Examples of Economic Costs
A construction company begins building a new high-rise apartment building next to a small, independent recording studio. The studio's business relies on maintaining a perfectly quiet environment for its clients. Arrange the following events in the logical order that demonstrates the creation and impact of a marginal external cost resulting from the construction.
External Costs of Ride-Sharing Services