1.) Consider the market for plastic grocery store bags. Suppose that demand for these bags is givenby PD = 24 – Qº and supply is given by PS = QS. These bags, after they are used, pile up inthe streets and get stuck in trees, creating unattractive litter. This litter imposes a negativeexternality of $2 per plastic bag. d.) If the government wanted to correct the negative externality in this market with aPigouvian tax on producers, what value should it set for the tax?e.) Compute consumer surplus, producer surplus, government surplus, and total surplus in themarket for plastic bags when the government imposes the Pigouvian tax on producers.

A Pigovian tax is a tax placed on any good which creates negative externality . The aim of a…

1.) Consider the market for plastic grocery store bags. Suppose that demand for these bags is giver by PD = 24 – QD and supply is given by PS = Q$. These bags, after they are used, pile up in the streets and get stuck in trees, creating unattractive litter. This litter imposes a negative externality of $2 per plastic bag.

1.) Consider the market for plastic grocery store bags. Suppose that demand for these bags is giver by PD = 24 – QD and supply is given by PS = Q$. These bags, after they are used, pile up in the streets and get stuck in trees, creating unattractive litter. This litter imposes a negative externality of $2 per plastic bag.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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7.
Consider the production and sale of Good B. Suppose that the “Social Value” of each unit of Good B is greater than the “Willingness to Pay” of the individual who consumes that unit. There are NO externalities associated with the production or consumption of Good B, and Good B is sold in a competitive market. Suppose that the “Efficient” level of output for Good B is 400,000 units. Is the market equilibrium level of output greater than 400,000, less than 400,000, or equal to 400,000 ( just circle your answer; you don’t have to explain)?
8) Consider a perfectly competitive market with a negative externality. What will happen to the social surplus if the government introduces a lump-sum tax on producers? A) Increase in the short run; increase in the long-run B) Increase in the short run; no change in the long-run C) Increase in the short run; decrease in the long-run D) No change in the short run; increase in the long-run E) No change in the short run; no change in the long-run F) No change in the short run; decrease in the long-run G) Decrease in the short run; increase in the long-run H) Decrease in the short run; no change in the long-run I) Decrease in the short run; decrease in the long-run J) The scenario described in this question is impossible because a perfectly competitive market cannot have a negative externality
1.) Consider the market for plastic grocery store bags. Suppose that demand for these bags is given by PD = 24 – QD and supply is given by PS = QS. These bags, after they are used, pile up in the streets and get stuck in trees, creating unattractive litter. This litter imposes a negative externality of $2 per plastic bag. a.) Compute the socially optimal quantity of plastic bags. b.) Compute the competitive equilibrium in the market for plastic bags. c.) Compute consumer surplus, producer surplus, and total surplus in the market for plastic bags in this competitive equilibrium.
Use appropriate figures to show the deadweight losses associated with a) positive externalities b) negative externalities (in a perfectly competitive goods market)
There are two people. Each person's demand for a public good is P = 20 - Q. The marginal cost of providing the public good is given by MC2 = $12 (MC is not $24). The above graph summarizes the relevant information. The total demand for the two workers shown above is the vertical sum of the demand curve for each worker.(a) What is the socially efficient quantity of the public good?(b) How much will each person have to pay per unit to provide the socially efficient quantity?(c) What is the consumer surplus for each person based on the quantity determined in (a) and the price determined in (b)?(d) Given that this is a public good, if either one of the two people does not pay the price you have stated in (b), can they be prevented from consuming the good?