O ECON 2100 OL HW12 - Compatibility ModeSaved to my MacHomeInsertDrawDesignLayoutReferencesMailingsReviewViewShareO Commentsv A^ A^Аa vE v E v E vTimes New...12AaBbCcDdEeAaBbCcDdEeAaBbCcDc AaBbCcDdE AaBbCcDcAaBbCcDdEeAaBbCcDdEe>AAE = = =Subtle Emph...StylesPaneSensitivityPasteВUv ab X,NormalNo SpacingHeading 1Heading 2TitleSubtitleEcon 2100HW 12Chapter 121. Use the data in the table to answer the following questions:Marginal PrivateQuantity Benefit (demand) ($) Cost (supply) ($)MarginalSocial Cost ($)Marginal Private$ 0$ 01$102429.3538.46.475756.6.8.6.579.748.108.39.11210121011113a. What is the external cost per unit of production?b. What level is produced if there is no correction of the externality?c. What level should be produced to achieve economic efficiency?d. If a per unit sales tax is introduced, what should the dollar value of the tax be to move the marketoutcome to the socially desirable output and price?2. Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking inPage 1 of 2810 wordsEnglish (United States)E3 Focus目晶225%

a. The external cost is the cost incurred by society when the individual makes the process of production. In this case, the marginal private cost and marginal social costs are given and the difference obtained while subtracting the marginal private cost from the marginal social cost is known as the external cost per unit of production. The external cost per unit of production can be calculated as follows: Thus, the external cost per unit of production is calculated to be $2.b. When there is no regulation in the economy, the business will try to maximize the profit from the market. The profit from the market will be maximized at the point where the marginal cost equals the marginal revenue. In this case, the MR and MC of the private individual will become equal when there is no regulation and from the table, it is identified that the business maximizes its profit at the level of 5 units where the marginal cost equals the marginal benefit at $6.c. Economic efficiency will be achieved when the economy has a price at which the marginal private benefit is equal to the marginal social cost. In the table above, it is observed that the MB is equal to MSC when it produces 4 units of output. At this 4 units level, the marginal private benefit, as well as cost, are equal to $7 each making it an economically efficient output.d. When the tax is imposed, it should increase economic efficiency. In this case, the external cost is calculated to be $2 which is constant throughout the different levels of output. the tax should eliminate the external costs or make the private benefit cover the external costs. Thus, the constant difference between the MR and SMC will be charged as tax which is equal to $2.

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1. Use the data in the table to answer the following questions: Marginal Private Quantity Benefit (demand) (S) Cost (supply) ($) Marginal Private Marginal Social Cost ($) $ 0 $ 0 1 $10 4 9 3 3 8 4 6. 4 7 5 7 5 6. 6 7 7 4 8 10 8 3 9. 11 9 2 10 12 10 1 11 13 a. What is the external cost per unit of production? b. What level is produced if there is no correction of the externality? c. What level should be produced to achieve economic efficiency? d. If a per unit sales tax is introduced, what should the dollar value of the tax be to move the market outcome to the socially desirable output and price?

1. Use the data in the table to answer the following questions: Marginal Private Quantity Benefit (demand) (S) Cost (supply) ($) Marginal Private Marginal Social Cost ($) $ 0 $ 0 1 $10 4 9 3 3 8 4 6. 4 7 5 7 5 6. 6 7 7 4 8 10 8 3 9. 11 9 2 10 12 10 1 11 13 a. What is the external cost per unit of production? b. What level is produced if there is no correction of the externality? c. What level should be produced to achieve economic efficiency? d. If a per unit sales tax is introduced, what should the dollar value of the tax be to move the market outcome to the socially desirable output and price?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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