Question

In: Economics

Answer the following questions for each of the three situations outlined below: What is the good...

  1. Answer the following questions for each of the three situations outlined below:
    1. What is the good or service being consumed? Does its consumption create externalities? If so, what they are and are they positive or negative?
    2. If the example involves externalities, identify who creates the externality and who benefits or suffers from it.

#1--Antibiotics are becoming less effective as bacteria evolve, a process accelerated by overuse of antibiotics by doctors. Nevertheless, a “survey of physicians showed they were most likely to choose the broadest spectrum [antibiotic] to treat pneumonia, despite guidelines to the contrary; contributing to resistance rated lowest among seven determinants of their choices. (The Milken Institute Review, Third Quarter 2012)”

#2--An AP article (Yabba Dabba Don’t, AP, April 7, 2019) reported on a house built by a rich retiree in Hillsborough, a posh suburb of San Francisco. The house is “…an elaborate homage to “The Flintstones” family…The bold, bulbous house is surrounded by Stone Age sculptures inspired by the 1960s cartoon, along with aliens and other oddities...” The town says the property is “an eyesore.” The resulting controversy “has sparked…an online petition signed by thousands to preserve the attention-grabbing property, visible from a nearby highway….”

#3--Avocados have become increasingly popular in China, Japan, and Canada, and some avocadoes that used to be exported to the United States are now sent to these other countries.   Prices for avocadoes in the US have increased dramatically as a result, causing some restaurants to add a surcharge on orders of guacamole.

Solutions

Expert Solution

Situation

Good/Service Consumed

Does it create externalities?

What are they and are they positive or negative

Creator of the externality

Beneficiary/Suffers of the externality   

1

Antibiotics

Yes

The over use of the product has lowered the effect of the product to fight the bacteria.

The externality is negative since the patients are unable to gain the benefit out of it since it has been over used since the doctors have overused it .

The Doctors

Suffers are the people who can not get cured with the product

2

House built by rich retiree

Yes

The House that is built is attracting visitors and members of the town do not like this aspect.

This situation has both negative and positive externalities.

This is a negative externality since the other members of the town who are not involved with the house in any ways are being affected by the attraction caused by the house.

The positive externality is that an increase in the visitors could generate more business for the suburb.

The Rich retiree who built the house.

People of town are suffering due to it.

The increase in visitors in the town may bring business to the suburb since it is visible from the highway

3

Avocados

Yes

The prices of the product are increasing in the USA.

There is a negative externality

China, Japan and Canada (Increased demand)

United states as the product is more expensive now.


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