**BN12.2 (a)****Case:**The market for dry cleaning is reflected by the demand and supply curves (Q is in thousands):- Demand equation: $ P_d = 5 - Q $- Supply equation: $ P_s = 2 + 2Q $Producing dry cleaning creates groundwater pollution with a constant marginal external cost of 1.2.**Question:**(a) Sketch a graph that shows the following:- $ D_{soc} $: Social demand curve- $ S_{priv} $: Private supply curve- $ S_{soc} $: Social supply curve- $ Q_{opt} $: Quantity from a societal perspective- Deadweight Loss (DWL) in an unregulated marketNote: There is no need to label the values in the graph. ---**Explanation for Graph Sketch:**1. **Demand Curve ($D_{soc}$):** - Reflects the market demand without considering external costs. The original demand curve is $ P_d = 5 - Q $.2. **Private Supply Curve ($S_{priv}$):** - Represents the supply without accounting for externalities. The original supply curve is $ P_s = 2 + 2Q $.3. **Social Supply Curve ($S_{soc}$):** - Incorporates the external cost into the supply curve. Adjust the private supply curve to account for the marginal external cost of 1.2, thus shifting it upward.4. **Quantity ($Q_{opt}$):** - The quantity produced considering societal perspective; it is where $D_{soc}$ intersects $S_{soc}$.5. **Deadweight Loss (DWL):** - The area between $S_{priv}$ and $S_{soc}$ for quantities exceeding $Q_{opt}$, representing the loss in welfare due to overproduction in an unregulated market.

The demand and supply equation is stated below. The constant marginal external cost is 1.2.

BN12.2 (a) Case: The market for dry cleaning is reflected by the demand and supply curves (Q is in thousands): Pa = 5 -Q Ps= 2+2Q Producing dry cleaning creates ground water pollution with a constant marginal external cost of 1.2. Question: (a) Sketch a graph that shows the Dsoc, Spriv, Ssoc, Qopt (societal perspective) and DWL in an unregulated market (No need to label the values in the graph)?

BN12.2 (a) Case: The market for dry cleaning is reflected by the demand and supply curves (Q is in thousands): Pa = 5 -Q Ps= 2+2Q Producing dry cleaning creates ground water pollution with a constant marginal external cost of 1.2. Question: (a) Sketch a graph that shows the Dsoc, Spriv, Ssoc, Qopt (societal perspective) and DWL in an unregulated market (No need to label the values in the graph)?

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

Suppose demand is QD=12−P and supply is QS=P. There is a constant positive externality of $3 per unit (marginal external benefit, MEB = $3). Find the market equilibrium quantity and the socially optimal quantity. the market equalibrium quantity is? the socially optimal quantity is?
The inverse demand curve for steel is P=300-Q, where price P is dollars per ton and output Q is millions of tons of steel. The industry marginal cost of producing a ton of steel is MC = 11 + 2Q, which is the industry supply curve. The industry marginal external cost of the damage caused by pollution emitted during the production of one additional ton of steel is MEC¹ = 6 + Q. The socially efficient amount of steel to produce is million tons, and the socially efficient price is $ per ton. (Enter your responses as real numbers rounded to two decimal places.)
Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC 110.5E_1 MAC_2= 30 - 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 tax on emissions. In principle, firms could continue to emit pollution as they were in the absence of government intervention, but by cutting back on emissions, their total compliance costs (tax payment plus total abatement costs) goes down. How much money can firms save if they reduce their emissions to E_Agg in response to the tax? Answer:
The demand for cigarettes is given by P 400 0.2Q. Cigarettes are manufactured at a constant marginal cost of 50 and sold in a competitive market. What is the quantity of cigarettes sold in equilibrium? Qprivate = 1750 Price 500 450- 400- 350- 300- 250- 200- 150- 100 If cigarettes generate a marginal external cost of MEC = 0.05Q, what is the socially optimal level of cigarettes? QSocially optimal 1400 Using Figure 1 on the right that already shows the market demand curve to illustrate the private and social MC curves. Also, point out the private market quantity, the socially optimal quantity, and the social welfare cost. 1) Using the line drawing tool, illustrate the private marginal cost curve. Label this curve as 'MC'. 2) Using the line drawing tool, illustrate the social marginal cost curve. Label this curve as 'MSC'. (Hint: to plot this correctly you may first want to plot the socially optimal point 'B' in step 4 below) 3) Using the point drawing tool, illustrate the point that…
Firms in a polluting industry can be classified in two groups: newer firms with a cleaner technology that can abate pollution at a lower marginal cost M CLA L = (1/2) aL and older firms with dirtier M CAH = aH , where ai is the level of abatement undertaken by firms of type i = L,H. The social marginal benefit of abating pollution from this particular industry is MBA = 120 - A, where A is the aggregate level of abatement in that industry: 1. What Pigouvian tax t will implement the efficient allocation (aL; aH )? Is the resulting allocation an efficient allocation? What is the government’s tax revenue? 2. Suppose that in order to avoid the costly obtention of disaggregate information about individual firms cost, the government just implements a uniform standard aui = A*/2. Is this allocation efficient? If not, what is the deadweight loss?
Please give detailed procedure
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:
1) a. what is the profit maximizing quantity of the good for The industry (Q1) when it is not forced to consider the externality? The profit-maximizing quanity for the industry (Q1) is: b. what is the profit maximizing quantity for the representative individual firm (q1)?
CENGAGE MINDTAP Homework #6 (Ch 10 & 11) Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative externality for those living downstream from the facility, Producing additional electric cars imposes a constant per-unit external cost of $245. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $245 per unit. PRICE (Dollars per unit of electric cars) 700 030 560 400 420 280 210 140 70 0 QUANTITY (Units of electric cars) ng cengage.com The market equilibrium quantity is B Supply (Private Cost) Demand (Private Value) Social Cost units of electric cars, but the socially optimal quantity of electric car production is To create an incentive for the firm to produce the socially optimal quantity of electric cars, the government could impose a per unit of…
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
The figure below shows the market for a chemical, of which the production causes certain negative externalities in the form of pollution. Define MCP = marginal private cost, MCS = marginal social cost, D = market demand, P = price, and Q = quantity. 4 10 (a) (b) (c) (d) 100 P MC, ML D If the market is competitive, what is the equilibrium price and quantity? Is this equilibrium outcome socially optimal? In terms of the areas denoted by A, B, and C, what is the deadweight loss to society if the market is competitive? What can the government do to achieve the socially optimal level of pollution?
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 $ ????