**Problem 5 Analysis: Demand and Supply Curves with Externalities****Description:**The demand and supply functions for product X are provided as follows:- Demand Curve: $ D(P) = 300 - 2P $- Supply Curve: $ S(P) = 3P - 100 $However, the production of product X generates a negative externality, resulting in an additional external marginal cost of $5 per unit produced.**Objective:**Determine the deadweight loss caused by the negative externality.**Solution:**1. **Equilibrium Without Externality:** - Equate quantity demanded ($ Q_d $) to quantity supplied ($ Q_s $): $ 300 - 2P = 3P - 100 $ - Solving for $ P $: $ 300 + 100 = 3P + 2P $ $ 400 = 5P $ $ P = 80 $ - Substitute $ P = 80 $ back into the demand or supply equation to find equilibrium quantity $ Q $: $ Q = 300 - 2(80) = 140 $2. **Socially Optimal Quantity with Externality:** - Include the external marginal cost in the supply function: New Supply Curve: $ S'(P) = 3P - 100 + 5 = 3P - 95 $ - Determine the new equilibrium by equating $ D(P) $ and $ S'(P) $: $ 300 - 2P = 3P - 95 $ - Solving for $ P $: $ 300 + 95 = 3P + 2P $ $ 395 = 5P $ $ P = 79 $ - Substitute $ P = 79 $ back into the demand or new supply equation to find socially optimal quantity $ Q $: $ Q = 300 - 2(79) = 142 $3. **Deadweight Loss:** - The deadweight loss (DWL) due to the negative externality can be calculated by finding the difference in quantities and the external marginal cost: DWL = External Marginal Cost * (Equilibrium Quantity - Socially Optimal Quantity) DWL = $5 * (140 - 142) =

Answered: Image /qna-images/answer/53273469-8c4c-4f25-a160-7d55a8946ba5.jpg

5) The demand and supply curves for product X are given by D(P)=300-2P and S(P)=3P-100 respectively. Unfortunately, the production of X results in a negative externality with a constant external marginal cost of $5 per unit produced. Find the deadweight loss.

5) The demand and supply curves for product X are given by D(P)=300-2P and S(P)=3P-100 respectively. Unfortunately, the production of X results in a negative externality with a constant external marginal cost of $5 per unit produced. Find the deadweight loss.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

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. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity? P 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
Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 11 - 2E_1 MAC_2 = 8.5 - E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = .5E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a per unit subsidy to abatement equal to $____. Answer:
The market for plasticans is perfectly competitive. Market Supply is given by Q=6P and Market Demand is given by Q=487-3P. Each extra unit of plastican produced imposes a negative externality of $5. What is the total cost of the externality at the market equilibrium? Enter a number only, no $ sign. Do NOT include a negative sign. 1,623.33
1. Suppose that Good X is sold in a perfectly competitive market. The supply curve is given by P=2Q, where P is the price of X per unit and Q is the quantity supplied. The demand curve is given by P=470-7Q. Suppose that the production process emits unpleasant smoke to the neighbourhood. The external marginal cost is estimated to be $24 per unit produced. The deadweight loss associated with this negative externality will be $ ????
USE THE GRAPH! There is a negative externality from Lyft rides (TRAFFIC) of $0.60 per mile. If the city still charged a $0.60 tax, what would be the deadweight loss? DWL=
Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC 1 10 - .5E_1 = MAC 2 20 E_2, = - and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = .5E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a cap and trade policy and sets the permit cap equal to F
If the production of a good causes a negative externality, the efficient level of output of that good is zero. False True
What is the socially optimal quantity, and how much is the social cost at this quantity?
Suppose demand is QD=9−P and supply is QS=P. There is a constant positive externality of $4 per unit (marginal external benefit, MEB = $4). Find the market equilibrium quantity and the socially optimal quantity. The market equilibrium quantity is enter your response here. (Round your answer to one decimal place.) The socially optimal quantity is enter your response here. (Round your answer to one decimal place.)
I chose option D and got this wrong. I thought that when you had a positive externality The demand curve move to the right. Wouldn’t this mean that the level of output and the price would be greater than the free market ones? can you explain how my answer is wrong? What is correct?
Consider a market where the demand curve is given by P = 190 – 0.2Q and the supply curve is given by P = 41 + 0.1Q. Production of this good generates an external cost as measured by the marginal external cost function MEC = 0.1Q. If the government wants to encourage firms to produce at the socially efficient level of output then how large should the per unit tax be? Enter a number rounded to two decimal places as necessary
Finding an Efficient Solution, Supply: P = 10.0 + 0.1Q; Demand: P = 50.0 − 0.125Q. Let Marginal External Cost (MEC) = 0.05Q. Solve for Q and P