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 $700. 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 $700 per unit. PRICE (Dollars per unit of electric cars) 2000 1800 1600 1400 1200 1000 800 600 400 200 0 O ☐ 1 O O 0 ■ The market equilibrium quantity is O ☐ 2 3 4 5 QUANTITY (Units of electric cars) ☐ Supply (Private Cost) 6 Demand (Private Value) 7 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 electric cars. units. of $

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 $700. 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 $700 per unit. PRICE (Dollars per unit of electric cars) 2000 1800 1600 1400 1200 1000 800 600 400 200 0 O ☐ 1 O O 0 ■ The market equilibrium quantity is O ☐ 2 3 4 5 QUANTITY (Units of electric cars) ☐ Supply (Private Cost) 6 Demand (Private Value) 7 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 electric cars. units. of $

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 following is a copy of the information from Question 1: Consider Product NE, which has a negative externality associated with its production and use ( i.e., the “Incidental Cost” ( IC) of each unit of Product NE is greater than zero). You are told that : * The “Efficient” Output of Product NE = 9000 units * The Free-Market Equilibrium Output of Product NE = 10,000 units * The Consumer’s Surplus + Producer’s Surplus on Unit Number 6000 ( i.e., on that one unit ALONE) is equal to $ 70 ( i.e., the sum of CS + PS = $ 70) * The Cumulative Surplus on the first 9000 units produced is equal to $ 175,000 ( i.e., the sum of the surplus( to society) on ALL 9000 units adds up to $ 175,000) Is the Cumulative Surplus on the first 10,000 units ( i.e., ALL 10,000 units together) greater than $ 175,000, less than $ 175,000, or exactly equal to $ 175,000 ? a. Greater Than $…
Suppose that the volume of traffic at which demand intersects private trip cost is 1000 cars and the 1000th car on the road slows the average car trip by 0.03 minutes. The volume of traffic at which demand intersects social trip cost is 800 cars and the 800th car on the road slows the average car trip by 0.02 minutes. The opportunity cost of car travel is $0.40 per minute. a) Compute the marginal external cost of travel at the market equilibrium. b) Compute the congestion tax (per trip) that would result in the socially efficient level of traffic. INSTRUCTIONS: Please type your answers in the space below. Show your work.
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.
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Please see below. If possible, please include where the pieces of the graph go.
Q6
Describe externalities as a source of market failure with the aid of a clearly labeled diagram.
The supply of fertilizer is described by the following equation: Qs= 3,000P where Qs is the supply per year and P is the price of fertilizer per ton. The demand for fertilizer is described by: Qd= 500,000 − 20,000P where Qd is tons of fertilizer demanded per year. The marginal external costs of $30 are associated with the production of each ton of fertilizer due to the pollution related to fertilizer production. explain your answers by showing your work. a) Assuming that fertilizer is sold in a competitive market, what is the market price?
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