Consider the market for bolts. Suppose that a hardware factory dumps toxic waste into a nearby river, creating a negative externality for those livingdownstream from the factory. Producing an additional ton of bolts imposes a constant external cost of $175 per ton. The following graph shows thedemand (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 external cost is $175 per ton.500450Social Cost400350Supply300(Private Cost)250200150100Demand50(Private Value)2467QUANTITY (Tons of bolts)The market equilibrium quantity istons of bolts, but the socially optimal quantity of bolt production istons.To create an incentive for the firm to produce the socially optimal quantity of bolts, the government could impose aof $per tonof bolts.PRICE (Dollars per ton of bolts)

Consider the market for bolts . Suppose that a hardware factory dumps toxic waste into a nearby…

Answered: Consider the market for bolts. Suppose…

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 primary source of air pollution in the small town of Smokey, Nevada is a nearby steel mill. The local environmental agency has decided that the mill needs to reduce its emissions because the town's population is located directly downwind from it. Currently the agency is considering three different approaches to reducing pollution from the mill: a technology standard, an emission standard and an emission tax. Why might the owner of the mill prefer an emission standard to a technology standard that would produce the same level of emissions? a Because with emission standards the polluter is more flexible in selecting the technology that will minimize her abatement cost Ob. Because polluters usually try to stick to their existing technology O C. Because it has been proven to be easier to implement O d. Because polluters, as all producers are suspicious about new technologies
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.
The table below 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. How does accounting for the externality affect the equilibrium price and quantity? Price 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 What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs. Identify the equilibrium price and quantity if we are able to account for social costs. Does it make sense that accounting for the negative externality results in a higher price? Explain your answer.
Calculate private market equilibrium and the socially optimal equilibrium for the following negative production externality. (note: demand and supply functions are already in the inverse format) Demand: P = 100 - Q Supply: P=-50 + 2Q Marginal External Cost: MEC = 2Q Private Market Equilibrium = Socially Optimal Equilibrium = (enter your responses rounded to a whole number)
This is an end-of-chapter problem that I'm struggling with! thanks!
In a market with a negative externality, like houses being painted with lead paint, the quantity produced in the market in a competitive will be than the quantity that maximizes total surplus. higher lower the same as
Air pollution creates a negative externality—a cost suffered by a third party as a result of an economic transaction. A standard solution to a negative externality is a Pigouvian tax, a tax that raises the marginal private cost of pollution emissions to the level of the marginal social cost. The socially optimal quantity of pollution emissions is then determined by the intersection of the marginal private benefit, or demand, curve and the marginal social cost curve. The article notes that "putting a dollar value on the benefits of cleaner air has been difficult." Assuming this problem has been resolved, in the accompanying diagram, move the endpoints of line Smarginal social cost to show the marginal social cost curve. Then move the line labeled "Tax" to show the amount of the tax needed to limit emissions to the socially optimal level.
The Centers for Disease Control and Prevention estimates that every alcoholic drink consumed generates roughly $2 in external economic costs. Briefly describe how you would model this externality in a supply and demand diagram (e.g. would you draw a social marginal cost curve or a social marginal benefit curve?).
Consider a manufactured good whose production process generates pollution. The demand for the product is Q=100-3P. The market supply function is Q=P. The marginal external cost is MEC=2Q. What is the emissions tax that needs to be imposed to achieve the social optimum? Illustrate on graph What is the economic incidence of this emissions tax? In other words, what proportion of this tax will be paid by producers of this product and what proportion of the tax will be paid by consumers?
The marginal cost of educating a college student is $2,000 a year. The table shows the marginal benefit schedule of a college education. The marginal external benefit of a college education is a constant $1,000 per student per year. There are no public colleges. If the government subsidizes colleges and sets the subsidy so that the efficient number of students enroll, what is the subsidy per student, how many students enroll, and what is the cost to taxpayers? The subsidy is $ per student and million students enroll. Students (millions per year) 1 2 3 4 5 6 7 8 8 Marginal benefit (dollars per student per year) 5,000 3,000 2,000 1,500 1,200 1,000 800 500
Suppose the production of widgets causes a negative externality of $12 per unit. The current market price is $20 and market quantity is 35 units. What should be the correct Pigovian tax to correct the negative externality?
Air horns impose many external costs on society: the risk of being deafened, the annoyance of being awakened in the middle of the night, and so on. Therefore, the market equilibrium quantity of air horns is not equal to the socially optimal quantity. The following graph shows the demand for air horns (their private value), the supply of air horns (the private cost of producing them), and the social cost of air horns, including both the private cost 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.

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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 external cost of $175 per ton. The following graph shows the