b. Determine the equilibrium price and quantity in this market.equilibrium price: $equilibrium quantity:million packsc. Determine the socially efficient price and quantity in this market.socially efficient price: $socially efficient quantitymillion packsd. The graph implies that cigarettes produce anegativeexternality. The marginal externalbenefit - ofsmoking is$7 a. Place point A at the equilibirum outcome. Place point B at the socially efficient outcome.Market for cigarettes10Marginal social costВMarginal private cost (supply)8A7Demand431306090120150180210240Quantity of cigarettes (millions of packs)COLOPrice ($)

b. The equilibrium price is $7 and the equilibrium quantity is 180 million packs because the…

Answered: equilibrium price: $ equilibrium…

equilibrium price: $ equilibrium quantity: million pack c. Determine the socially efficient price and quantity in this market. socially efficient price: $ socially efficient quantity million pack

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter2: The One Lesson Of Business

Section: Chapter Questions

Problem 2.3IP

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Question

b. Determine the equilibrium price and quantity in this market.
equilibrium price: $
equilibrium quantity:
million packs
c. Determine the socially efficient price and quantity in this market.
socially efficient price: $
socially efficient quantity
million packs
d. The graph implies that cigarettes produce a
negative
externality. The marginal external
benefit - of
smoking is
$7

a. Place point A at the equilibirum outcome. Place point B at the socially efficient outcome.
Market for cigarettes
10
Marginal social cost
В
Marginal private cost (supply)
8
A
7
Demand
4
3
1
30
60
90
120
150
180
210
240
Quantity of cigarettes (millions of packs)
CO
LO
Price ($)

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