3. The effect of negative externalities on the optimal quantityof consumption Consider the market for bolts. Suppose that a hardware factory dumps toxic waste into a nearby river, creating a negative externality for those livinc downstream from the factory. Producing an additional ton of bolts imposes a constant external cost of $315 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for bolts. Use the purple points (diamond symbol) to plot the social cost curve when the extemal cost is $315 per ton. 900 810 720 Social Cost 630 540 450 Supply (Private Cost) 360 270 Demand 180 (Private Value) 90 4 6 7 QUANTITY (Tons of bolts) PRICE (Doll ars perton of bolts)

3. The effect of negative externalities on the optimal quantityof consumption Consider the market for bolts. Suppose that a hardware factory dumps toxic waste into a nearby river, creating a negative externality for those livinc downstream from the factory. Producing an additional ton of bolts imposes a constant external cost of $315 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for bolts. Use the purple points (diamond symbol) to plot the social cost curve when the extemal cost is $315 per ton. 900 810 720 Social Cost 630 540 450 Supply (Private Cost) 360 270 Demand 180 (Private Value) 90 4 6 7 QUANTITY (Tons of bolts) PRICE (Doll ars perton of bolts)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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