2. Table: The following table shows the private value, private cost, and social value for a market with a positive externality. Quantity Private Value Private Cost Social Value 1 27 6 34 12 24 10 31 13 21 14 28 14 18 18 25 15 15 22 22 16 12 26 19 a. What is the market equilibrium quantity of output for this product? b. What is the socially-optimal level of output in this market? c. How large would a per unit subsidy need to be in this market to move the market from the equilibrium level of output to the socially-optimal level of output?

2. Table: The following table shows the private value, private cost, and social value for a market with a positive externality. Quantity Private Value Private Cost Social Value 1 27 6 34 12 24 10 31 13 21 14 28 14 18 18 25 15 15 22 22 16 12 26 19 a. What is the market equilibrium quantity of output for this product? b. What is the socially-optimal level of output in this market? c. How large would a per unit subsidy need to be in this market to move the market from the equilibrium level of output to the socially-optimal level of output?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3 Let the market supply (representing the marginal private cost) have the form: P(Q) = 1 + 3Q, and the inverse market demand (representing the marginal social benefit) has the form: P(Q) = 25 - Q. Suppose that the production of Q is characterized by a negative externality. The magnitude of the externality (marginal damage) is $4 per unit of Q. a) Find the equilibrium price, quantity, consumer surplus, and the producer surplus resulting from an unregulated market in Q. b) Compute the net economic benefit to society which results from an unregulated market in Q. Note: you need to account for the total damages resulting from an externality. c) What is the socially efficient quantity of Q? d) At the efficient allocation, what is the net benefit to society?
2. A perfectly competitive market exists for almonds. Demand for almonds is Q= 200 – P where P is the price of almonds and Q is the total quantity of almonds. The private total Q? The production of almonds cost for the unregulated market is C 50 + 80Q + Q² First, solve for the 2 creates an externality where the total external cost is E = Pigouvian tax (per unit of output of almonds) that results in the social optimum. Suppose that one company, MegaAlmonds, becomes a monopolist in the production of almonds. What is the optimal tax that should be placed on the almonds in this case?
2. Suppose that demand for a product is Q = 1200 - 4P and supply is Q = -240 +2 P. Furthermore, suppose that the marginal external damage of this product is $12 per unit. How many more units of this product will the free market produce than is socially optimal? Calculate the deadweight loss associated with the externality.
The table below shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. Qs1 is the quantity supplied without social costs. Qs2 is the quantity supplied with social costs. How does accounting for the externality affect the equilibrium price and quantity? Price Qd Qs1 Qs2 $20 0 10 8 $18 1 9 7 $15 2.5 7.5 5.5 $12 4 6 4 $10 5 5 3 $5 7.5 2.5 0.5 What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs. Identify the equilibrium price and quantity if we are able to account for social costs. Does it make sense that accounting for the negative externality results in a higher price? Explain your answer.
Exhibit 30-2 Price and Cost 0 a) Refer to Exhibit 30-2. If the exhibit represents a positive externality situation, the social benefit of expanding output from Q₁ to Q₂ is the area of b) 0₁ 0₂ Q₁CBQ2. Q₁AEQ2. Q₁ABQ₂. d) ABE. Quantity
Only typed answer You are an industry analyst that specializes in an industry where the market inverse demand is P = 100 - 3Q. The external marginal cost of producing the product is MCExternal = 6Q, and the internal cost is MCInternal = 14Q. Instruction: Round your answers to the nearest two decimal places. a. What is the socially efficient level of output? units b. Given these costs and market demand, how much output would a competitive industry produce? units c. Given these costs and market demand, how much output would a monopolist produce? units d. Which of the following are actions the government could take to induce firms in this industry to produce the socially efficient level of output. Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit. Pollution taxes…
The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below. Price Quantity Demanded Quantity Supplied without Paying Social Costs Quantity Supplied after Paying Social Costs 100 0 120 75 80 10 100 50 55 30 90 30 40 55 85 25 30 80 80 20 20 100 65 15 The equilibrium price and quantity when only private costs are taken into account are Question 11 options: Price = $55, Quantity = 30 Price = $40, Quantity = 55 Price = $30, Quantity = 20 Price = $30, Quantity = 80
Price 10 9 8 7 6 Cr 4 3 2 1 0 0 100 200 300 400 500 600 Quantity Answers typed in all of the blanks will be automatically saved. X₂ X² Ω· equilibrium, the price is 3 PMC=S 700 800 900 1,000 1,100 1,200 SWTP Consider the attached graph showing a market with a positive externality. At the competitive market and the quantity is 600 D=WTP At this competitive equilibrium, consumer surplus is Type your answer here, producer surplus is the damage to the environment is Type your answer here Type your answer here, and the total external benefits caused in the production of the good is Type your answer here. Societal welfare - the sum of consumer surplus and producer surplus less
Below is the hypothetical supply and demand diagram for iron supplements in Brazil with positive externalities. 1. Move Ej to the market's equilibrium. 2. Move E2 to the socially optimal equilibrium. Market for Iron Supplements 5.0 E 1 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 D social D internal 0.5 0.0 100 200 300 400 500 600 700 800 900 1,000 Quantity (thousands) Price ($)
ģi Refer to the table below, which presents information on a market that provides positive externalities on society. Private marginal benefit Marginal cost $300,000 $340,000 $310,000 $330,000 $320,000 $320,000 $330,000 $310,000 $340,000 $300,000 $350,000 $290,000 Calculate the quantity that would be produced if society did not incorporate the social marginal benefits of this good or service. Type your answer... Quantity 6,000 7,000 8,000 9,000 10,000 11,000 F1 a 2 W JAN X Q 18 F2 # 3 20 F3 F $ 4 F4 R % 5 F5 T MacBook Air A 6 F6 Y & 887 stv F7 U * 00 8 FB O ( 9 Private+social marginal benefit $360,000 $350,000 $340,000 $330,000 $320,000 $310,000 F9 1 W 0 F10 Aa zoom P F11 Submit F12 = IT ľ
3. The effect of negative externalities on the optimal quantityof consumption Consider the market for pharmaceuticals. Suppose that a pharmaceutical factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing additional pharmaceuticals imposes a constant per-unit external cost of $280. The following graph shows the demand (private value) curve and the supply (private cost) curve for pharmaceuticals. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $280 per unit. PRICE (Dollars per unit of pharmaceuticals) 800 720 640 560 480 400 320 240 160 80 O 1 2 3 □ O O ㅁ 4 Supply (Private Cost) Demand (Private Value) 5 6 7 QUANTITY (Units of pharmaceuticals) Social Cost ? The market equilibrium quantity is units of pharmaceuticals, but the socially optimal quantity of pharmaceuticals production is units. To create an incentive for the firm to produce the socially optimal…
Suppose that at market equilibrium, the marginal private cost is $29 and the marginal social cost is $52. What is the value of the external cost to society?