-Consider the market for electricity. Suppose that a power plant dumps byproducts into a nearby river, creating a negative externality for those livingdownstream from the plant. Producing additional electricity imposes a constant per-unit external cost of $240. The following graph shows the demand(private value) curve and the supply (private cost) curve for electricity.Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $240 per unit.PRICE (Dollars per unit of electricity)80072064056048040032024016080ΟSupply(Private Cost)Demand(Private Value)001234567QUANTITY (Units of electricity)Social Cost?The market equilibrium quantity isunits of electricity, but the socially optimal quantity of electricity production isunits.To create an incentive for the firm to produce the socially optimal quantity of electricity, the government could impose aunit of electricity.of $per

To plot the social cost curve, remember that the social cost curve reflects the private costs and…

Answered: - Consider the market for electricity.…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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ayor Grinch imposes a $1 tax on each bottle of Zlurp. Consumption per person is now bottles. This yields a per-person consumer surplus of not including the cost of pollution, a per-person external cost of , and government revenue of per person. Total surplus per person is now as a result of this policy. (Hint: Total surplus is equal to consumer surplus minus the external cost of pollution plus government revenue.) Based on your calculations, you support the mayor's policy because it welfare compared to before the tax.
Which of the following policies could help the government achieve the efficient outcome? Check all that apply. Introduce emission taxes Offer a subsidy to consumers equal to the vertical distance between the marginal private benefit curve and the marginal social benefit curve Implement tradable pollution permits Offer a subsidy equal to the price at the efficient outcome Offer a subsidy to producers equal to the vertical distance between the marginal private benefit curve and marginal social benefit curve
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 $…
What externality is carbon pricing trying to address? Explain why this is an externality. What roll does government have in addressing externalities
Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 12-2E_1 MAC_2=9-E_2, and assume marginal external damages (MED) from aggregate emissions from the two firms (E_Agg) is: MED = E_Agg. Total external damages at the socially efficient level of aggregate emissions is Answer: 1
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
9) An externality of $5/unit based on the positive social effects of their consumption exists in this market. 20 15 10 10 15 20 Quantity (units) Draw the new social curve on the graph above and answer: Private | Social Social Consumer's Surplus. Producer's Surplus Optimal P Optimal Q Price ($/unit)
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.
Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 24 - 2E_1 MAC_2 = 16 - E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = 2E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a cap and trade policy and sets the cap equal to the socially efficient level of emissions (E*_Agg). If firm 1 is initially grandfathered 2 permits, it will buy ____ more permits.
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)
Consider the market illustrated in the figure to the right. Supply curve S₁ represents the private cost of production and demand curve D₁ represents the private benefit from consumption. Suppose consumption of this good creates a positive externality. Show how the externality affects the market. 1.) Use the line drawing tool to draw either a new supply (S₂) or demand (D₂) curve incorporating the positive externality in consumption. Properly label this line. 2.) Use the point drawing tool to indicate the market equilibrium price and quantity. Label this point 'Market equilibrium'. 3.) Use the point drawing tool to indicate the efficient equilibrium price and quantity. Label this point 'Efficient equilibrium'. Carefully follow the instructions above, and only draw the required objects. Price Quantity S₁ D₁ N
Suppose that in greater Sydney, the demand for flowering plants is given by P = 60 - Q, and supply is given by P= 0.2Q, where Q represents thousands of plants. Because people enjoy seeing flowers as they pass by others' houses, these plants produce a positive externality. Suppose that each plant produces a marginal external benefit equal to $6. 1. What will be the market price and the quantity supplied of flowering plants? 2. What is the socially optimal number of plants?

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