14. Suppose that the market for a certain good has an inverse demand of P = 200 – Q. The aggregate private marginal cost for the firms that produce the good is MC = 20 + Q. However, production of the good also creates pollution with a external marginal cost of EMC = 10 + 2Q. e. If this is a perfectly competitive market with no regulation, what is the equilibrium price and quantity produced? f. Suppose instead that the market is a monopoly. Calculate the profit- maximizing price and quantity. g. Determine the socially efficient price and quantity for the good. h. Calculate the socially optimal per-unit tax to levy on the competitive firms and the monopolist respectively to make them produce at the socially efficient level.

14. Suppose that the market for a certain good has an inverse demand of P = 200 – Q. The aggregate private marginal cost for the firms that produce the good is MC = 20 + Q. However, production of the good also creates pollution with a external marginal cost of EMC = 10 + 2Q. e. If this is a perfectly competitive market with no regulation, what is the equilibrium price and quantity produced? f. Suppose instead that the market is a monopoly. Calculate the profit- maximizing price and quantity. g. Determine the socially efficient price and quantity for the good. h. Calculate the socially optimal per-unit tax to levy on the competitive firms and the monopolist respectively to make them produce at the socially efficient level.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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