Cigarette smoking imposes many external costs on society: secondhand smoke, the litter on the street from discarded butts, and so on. Therefore, the market equilibrium quantity of cigarettes is not equal to the socially optimal quantity. The following graph shows the demand for cigarettes (their marginal private benefits), the supply of cigarettes (the marginal private costs of producing them), and the marginal social costs of cigarettes, including both the marginal private costs and external costs. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. Finally, use the grey polygon (star symbol) to indicate the area representing market failure. PRICE OF CIGARETTES MSC Supply (MPC) Demand (MPB, MSB) QUANTITY OF CIGARETTES Market Output Socially Optimal Output Market failure ?

Cigarette smoking imposes many external costs on society: secondhand smoke, the litter on the street from discarded butts, and so on. Therefore, the market equilibrium quantity of cigarettes is not equal to the socially optimal quantity. The following graph shows the demand for cigarettes (their marginal private benefits), the supply of cigarettes (the marginal private costs of producing them), and the marginal social costs of cigarettes, including both the marginal private costs and external costs. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. Finally, use the grey polygon (star symbol) to indicate the area representing market failure. PRICE OF CIGARETTES MSC Supply (MPC) Demand (MPB, MSB) QUANTITY OF CIGARETTES Market Output Socially Optimal Output Market failure ?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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?
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Consider the market for bolts. Suppose that a hardware factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additional ton of bolts imposes a constant marginal external cost (MEC) of $75 per ton. The following graph shows the demand (marginal private benefits, or MPB) curve and the supply (marginal private costs, or MPC) curve for bolts. Use the purple points (diamond symbol) to plot the marginal social costs (MS) curve when the marginal external cost is $75 per ton.
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This is an end-of-chapter problem that I'm struggling with! thanks!
Differentiate between private goods, public goods, common resources, and externalities
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