Consider the market for fish in public water, illustrated inthe figure to the right, where S, is marginal private costand D, is marginal private benefit.Fish are an example of a common resourceSuppose that the use of fish in public water generates anegative externality of $150 per unit.If so, then according to the figure, the optimal quantity offish in public water for society is units. (Enter yourresponse as an integer.)FOLLOPrice of fish in public water (perton)600-550-500-450-400-350-300-250-200-150-100-50-S3 4 5 6 7 8 9 10 11 1:Quantity of fish in public water

The diagram shows a case for fish as a public good. A resource is common when it is available to…

Answered: Consider the market for fish in public…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. The effect of negative externalities on the optimal quantity of consumption 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 $600. 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 $600 per unit. PRICE (Dollars per unit of electric cars) 2000 1800 1600 1400 1200 1000 800 600 400 200 0 0 + 1 O □ ☐ O 2 3 4 5 QUANTITY (Units of electric cars) The market equilibrium quantity is ☐ 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…
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?
3. The effect of negative externalities on the optimal quantityof consumption Consider the market for paper. Suppose that a paper factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additional ton of paper imposes a constant external cost of $385 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for paper. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $385 per ton. PRICE (Dollars per ton of paper) 1100 990 880 770 660 550 440 330 220 110 0 0 ☐ 1 ☐ 2 3 4 5 QUANTITY (Tons of paper) O n Supply 8 (Private Cost) Demand (Private Value) 7 Social Cost (?) The market equilibrium quantity is tons of paper, but the socially optimal quantity of paper production is To create an incentive for the firm to produce the socially optimal quantity of paper, the government could impose a of paper. tons. of $ per ton
Vork (Ch 10) 2. Efficiency in the presence of externalities Cars impose 'many external costs on society: exhaust emissions that contribute to air pollution, congestion on roadways, and so on. Therefore, the market equilibrium quantity of cars is not equal to the socially optimal quantity. The following graph shows the demand for cars (their private value), the supply of cars (the private cost of producing them), and the social cost of cars, 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. Social Cost Market Equilibrium Supply (Private Cost) Socially Optimal Level Demand (Private Value) QUANTITY OF CARS PRICE OF CARS
Sh 13 Subject - economics
3. The effect of negative externalities on the optimal quantity of consumption Consider the market for paper. Suppose that a paper factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additional ton of paper imposes a constant external cost of $105 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for paper. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $105 per ton. PRICE (Dollars per ton of paper) 700 630 560 490 420 350 280 210 140 70 0 0 1 O O 2 ☐ ■ 3 O 4 5 QUANTITY (Tons of paper) ☐ 6 Supply (Private Cost) Demand (Private Value) 7 Social Cost ?
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.
Price of a movie ticket $14 11 B) 16 C) 18 D) 19 9 8 6 14 16 Supply D₁ = marginal private benefit D₂= marginal social benefit 18 19 Quantity of movie tickets (hundreds per day) Figure 1 illustrates the market for movie tickets during a pandemic, where the government has decided it needs to restrict the sale of tickets for social distancing purposes. The figure illustrates an externality in consumption from going to a movie theater because the cost of spreading the virus is borne by other people. The demand curve showing marginal private benefit includes the chance of spreading the virus by contracting it while inside a movie theater. Question 1. Refer to Figure 1. The efficient equilibrium quantity of movie tickets is hundred per day. A) 14
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3. The effect of negative externalities on the optimal quantityof consumption Consider the market for pharmaceuticals. Suppose that a pharmaceutical factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing additional pharmaceuticals imposes a constant per-unit external cost of $280. The following graph shows the demand (private value) curve and the supply (private cost) curve for pharmaceuticals. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $280 per unit. PRICE (Dollars per unit of pharmaceuticals) 800 720 640 560 480 400 320 240 160 80 O 1 2 3 □ O O ㅁ 4 Supply (Private Cost) Demand (Private Value) 5 6 7 QUANTITY (Units of pharmaceuticals) Social Cost ? The market equilibrium quantity is units of pharmaceuticals, but the socially optimal quantity of pharmaceuticals production is units. To create an incentive for the firm to produce the socially optimal…
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.
On graph Price 150,300,450 , 600,.................1500 Quantity 0,1,2,3,4,5...

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