Extra Credit: 41) Studies have shown that drinking one glass…

Extra Credit: 41) Studies have shown that drinking one glass of red wine per day may help prevent heart disease. Assume this is true, and favorable weather has increased the grape harvest of California vineyards. In the market for red wine, these two developments would

34) Suppose that in Germany, the opportunity cost of produci…

34) Suppose that in Germany, the opportunity cost of producing a gallon of beer is 5 gallons of wine. In Italy, the opportunity cost of producing a gallon of beer is 3 gallons of wine. What is the opportunity cost of producing a gallon of wine for Germany? What is the opportunity cost of producing a gallon of wine for Italy? Which country has a comparative advantage in the production of beer? Which country has a comparative advantage in the production of wine?

Coal burning utilities release sulfur dioxide and nitric aci…

Coal burning utilities release sulfur dioxide and nitric acid which react with water to produce acid rain. Acid rain damages trees and crops and kills fish. Because the utilities do not bear the cost of the acid rain, they overproduce the quantity of electricity. 23) S1 represents the supply curve that reflects the marginal private cost of production and S2 represents the supply curve that reflects the marginal social cost of production. One way to internalize the external cost generated by utilities is to impose a Pigovian tax on the production of electricity. What is the size of the Pigovian tax that will internalize the cost of the externality?