Demand: Qd = 1200 - 3P %3D Supply 1: Q1 = -200 + 2P %3D Supply 2: Q2 = -600 + 2P KAK Panel A Panel Panel C Price Price Price Panel D Quantity PanelE Quantity Panel F Quantity Price Price Price Quantity Quantity Quantity 1. Suppose supply 1 the is private supply and there is an externality represented by supply 2. Suppose we use a subsidy policy to internalize the externality and we are analyzing what happens in the short run. a. Which of the six panels best depicts this case? Justify your answer. b. Calculate the subsidy rate that will completely internalize this externality. c. Calculate the change in consumers surplus, producers surplus, transfer of income from taxpayers to producers, transfer of income from consumers to the government and net social loss of the tax. Justify your answer.

Demand: Qd = 1200 - 3P %3D Supply 1: Q1 = -200 + 2P %3D Supply 2: Q2 = -600 + 2P KAK Panel A Panel Panel C Price Price Price Panel D Quantity PanelE Quantity Panel F Quantity Price Price Price Quantity Quantity Quantity 1. Suppose supply 1 the is private supply and there is an externality represented by supply 2. Suppose we use a subsidy policy to internalize the externality and we are analyzing what happens in the short run. a. Which of the six panels best depicts this case? Justify your answer. b. Calculate the subsidy rate that will completely internalize this externality. c. Calculate the change in consumers surplus, producers surplus, transfer of income from taxpayers to producers, transfer of income from consumers to the government and net social loss of the tax. Justify your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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