Please see attached 1. Suppose we are considering the Florida market for sugar. Assume that demand reflects theMarginal Willingness to Pay (MWTP) for sugar; and that supply reflects the Marginal PrivateCost (MPC) of sugar production. Assume for simplicity that they are linear.Let that the market demand for sugar be given by the functionP = 20-0.5Q[assume that MWTP = 20-0.5Q]If the price of sugar is $10, what is the quantity demanded of sugar? Show your work.If the price of sugar is $10, what is the total amount spent on sugar by all the consumers?Show your work.c.If the price of sugar is $10, what is the total willingness to pay for sugar by all theconsumers? Show your work.Now assume that and the market supply of sugar be given by the function[assume that MPC = 2 + 0.5Q]d. What is the free-market equilibrium price and quantity of sugar? Show your work.e. Suppose that the production of sugar leads to pollution. This pollution is creating aMarginal External Costs (MEC) of $4 per unit of sugar produced. For simplicity, theMEC is constant. Given this external cost, what would the Marginal Social Cost (MSC)function be?a.b.P = 2+0.5Qf. Given the MSC identified in part (e), what is the socially efficient quantity of sugarproduction? What about the socially efficient price? How does this new quantity and itsassociated price compare to the market outcome without intervention?A

Answered: 1. Suppose we are considering the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Please see attached

1. Suppose we are considering the Florida market for sugar. Assume that demand reflects the
Marginal Willingness to Pay (MWTP) for sugar; and that supply reflects the Marginal Private
Cost (MPC) of sugar production. Assume for simplicity that they are linear.
Let that the market demand for sugar be given by the function
P = 20-0.5Q
[assume that MWTP = 20-0.5Q]
If the price of sugar is $10, what is the quantity demanded of sugar? Show your work.
If the price of sugar is $10, what is the total amount spent on sugar by all the consumers?
Show your work.
c.
If the price of sugar is $10, what is the total willingness to pay for sugar by all the
consumers? Show your work.
Now assume that and the market supply of sugar be given by the function
[assume that MPC = 2 + 0.5Q]
d. What is the free-market equilibrium price and quantity of sugar? Show your work.
e. Suppose that the production of sugar leads to pollution. This pollution is creating a
Marginal External Costs (MEC) of $4 per unit of sugar produced. For simplicity, the
MEC is constant. Given this external cost, what would the Marginal Social Cost (MSC)
function be?
a.
b.
P = 2+0.5Q
f. Given the MSC identified in part (e), what is the socially efficient quantity of sugar
production? What about the socially efficient price? How does this new quantity and its
associated price compare to the market outcome without intervention?
A

Expert Solution

Step 1: Define willimgness to pay:

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Willingness to pay (WTP) represents the maximum price or value that a consumer is willing to spend or pay for a good or service, reflecting their preferences and the utility they derive from it. It is a key concept in understanding consumer behavior and pricing decisions.

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