es The production of steel causes air pollution. Assume that the damage done by this pollution can be quantified as $200 per ton of steel produced. The figure below shows the marginal private benefit and the marginal private cost of steel. Price $650 $600 $550 $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 10200 DWL MC Tons of steel (millions) social Safter-tax S D=MB MB S=MCpvt pvt social Tools after-tax MCsocial DWL Instructions: Round your answers to two decimal places. a. Draw the marginal social cost of steel on the graph. Instructions: Use the tool provided 'MC social and plot only the two endpoints across the range of output (0-120). b. Suppose the government decides to intervene in this market by imposing a tax of $75 per ton of steel produced. Draw the shift in the supply curve that will occur as a result of this subsidy. Instructions: Use the tool provided 'Safter-tax and plot only the two endpoints across the range of output (0-120). c. A $75 tax is too low Draw the deadweight loss that remains after the government imposes a $75 tax. Instructions: Use the tool provided 'DWL' to illustrate this area on the graph. Drag the points to move or resize. The deadweight loss to society when the government imposes a $75 tax is: $ 937.5 million. To eliminate the deadweight loss entirely, the government should impose a tax of: $ 200.
es The production of steel causes air pollution. Assume that the damage done by this pollution can be quantified as $200 per ton of steel produced. The figure below shows the marginal private benefit and the marginal private cost of steel. Price $650 $600 $550 $500 $450 $400 $350 $300 $250 $200 $150 $100 $50 10200 DWL MC Tons of steel (millions) social Safter-tax S D=MB MB S=MCpvt pvt social Tools after-tax MCsocial DWL Instructions: Round your answers to two decimal places. a. Draw the marginal social cost of steel on the graph. Instructions: Use the tool provided 'MC social and plot only the two endpoints across the range of output (0-120). b. Suppose the government decides to intervene in this market by imposing a tax of $75 per ton of steel produced. Draw the shift in the supply curve that will occur as a result of this subsidy. Instructions: Use the tool provided 'Safter-tax and plot only the two endpoints across the range of output (0-120). c. A $75 tax is too low Draw the deadweight loss that remains after the government imposes a $75 tax. Instructions: Use the tool provided 'DWL' to illustrate this area on the graph. Drag the points to move or resize. The deadweight loss to society when the government imposes a $75 tax is: $ 937.5 million. To eliminate the deadweight loss entirely, the government should impose a tax of: $ 200.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
specifically the DWL
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Transcribed Image Text:es
The production of steel causes air pollution. Assume that the damage done by this pollution can be quantified as $200
per ton of steel produced. The figure below shows the marginal private benefit and the marginal private cost of steel.
Price
$650
$600
$550
$500
$450
$400
$350
$300
$250
$200
$150
$100
$50
0
DWL
70 20 30 70 50 % ²0 %⁹0'%²
Tons of steel (millions)
c. A $75 tax is too low
MC
+
S=MC
D=MB =MB
pvt
70
Safter-tax
social
pvt
120
social
130
140
S
Tools
after-tax
MC social
Instructions: Round your answers to two decimal places.
a. Draw the marginal social cost of steel on the graph.
Instructions: Use the tool provided 'MC social and plot only the two endpoints across the range of output (0-120).
b. Suppose the government decides to intervene in this market by imposing a tax of $75 per ton of steel produced.
Draw the shift in the supply curve that will occur as a result of this subsidy.
Instructions: Use the tool provided 'Safter-tax' and plot only the two endpoints across the range of output (0-120).
DWL
Draw the deadweight loss that remains after the government imposes a $75 tax.
Instructions: Use the tool provided 'DWL' to illustrate this area on the graph. Drag the points to move or resize.
The deadweight loss to society when the government imposes a $75 tax is: $ 937.5 million.
To eliminate the deadweight loss entirely, the government should impose a tax of: $
200
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