3.) Consider the market for beehives. Suppose that the demand for beehives of local apiarists is given by pD = 43 – 4QD and the supply curve of beehives is given by PS = 3Q$ + 8. Suppose that bees from the apiarists' beehives sometimes sting bystanders, which the bystanders find painful and unpleasant. These stings thus represent a negative externality. The cost of the stings from the bees of any given beehive is equal to $7.00. a.) Compute total surplus in this market if there is no intervention from the local government. b.) Compute total surplus in this market if the local government imposes the Pigouvian tax to correct the externality. c.) What is the dead weight loss of the government not taxing in this market?

3.) Consider the market for beehives. Suppose that the demand for beehives of local apiarists is given by pD = 43 – 4QD and the supply curve of beehives is given by PS = 3Q$ + 8. Suppose that bees from the apiarists' beehives sometimes sting bystanders, which the bystanders find painful and unpleasant. These stings thus represent a negative externality. The cost of the stings from the bees of any given beehive is equal to $7.00. a.) Compute total surplus in this market if there is no intervention from the local government. b.) Compute total surplus in this market if the local government imposes the Pigouvian tax to correct the externality. c.) What is the dead weight loss of the government not taxing in this market?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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