Externalities: Suppose the daily inverse demand curve for gasoline in Portland is given by P = $100 – Q, the MC = 1.5Q, and the EMC = 1.5Q. Q is measured in thousands of gallons of gasoline per day. a. Graph the demand, marginal cost, and external marginal cost functions. b. How many gallons will be consumed per day if gasoline consumers do not consider the EMC of gasoline? c. How many gallons of gasoline will be consumed per day if gasoline consumers consider the EMC.

Externalities: Suppose the daily inverse demand curve for gasoline in Portland is given by P = $100 – Q, the MC = 1.5Q, and the EMC = 1.5Q. Q is measured in thousands of gallons of gasoline per day. a. Graph the demand, marginal cost, and external marginal cost functions. b. How many gallons will be consumed per day if gasoline consumers do not consider the EMC of gasoline? c. How many gallons of gasoline will be consumed per day if gasoline consumers consider the EMC.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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No hand written solution Afirm has an industrial plant that emits pollutants into a town’s lake. The plant’s marginal abatement function is MAC= 200 – 0.5E and damages caused by its emissions are given by MD = 2E where emissions are in kg. per day. What is the socially efficient level of emissions from this plant? Illustrate this in a graph. As an incentive to reduce emissions to the socially efficient level, government offers to pay the firm for each kg. of emissions it abates per day from this plant. What subsidy per kg. should the government offer? If the plant abates to the socially efficient level of emissions, what total subsidy payment would the firm receive? Identify the area in your graph. How much better or worse off would the firm be compared to if it did no abating? Identify the area in your graph. What would be the net benefit to society if we pay the firm to reduce the plant’s emissions to the socially efficient level? Identify this area in your graph.
2. Given the demand function of motorcycle: Q = 500 – 100P where Q is total quantity demanded (unit: 10,000) and P is daily price (in unit of US$). (1) If the current daily price is US$1.0, please find the total quantity demanded. (2) If the external costs of motorcycle ($2) are all internalized, what would be the total quantity demanded? (3) Please also discuss impacts of this internalization policy on supply, demand and public infrastructures.
Refer to Figure. Which of the following statements is correct? Price 22 24 22 81 18 16 Social cost (private cost and external cost) Supply (private cost) Demand (private value) 120 160 Quantity a. The private cost of producing the 160th unit of output is $16 b. The social cost of producing the 160th unit of output is $22. c. d. The external cost of producing the 160th unit of output is $6. All of the above are correct.
You are an industry analyst that specializes in an industry where the market inverse demand is P = 300 - 4Q. The external marginal cost of producing the product is MCExternal = 8Q, and the internal cost is MCInternal = 15Q.Instructions: Enter your responses rounded to the nearest two decimal places.a. What is the socially efficient level of output? unitsb. Given these costs and market demand, how much output would a competitive industry produce? unitsc. Given these costs and market demand, how much output would a monopolist produce? unitsd. Which of the following are actions the government could take to induce firms in this industry to produce the socially efficient level of output.Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click twice to empty the box.check all that apply Pollution taxes Nonrival consumption Pollution permits
Consider the market for fire extinguishers. d. If the external benefit is $10 per extinguisher,describe a government policy that would yield theefficient outcome.
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By imposing a tax on the production of electricity equal to the cost of acid rain, the government will cause electric utilities to internalize the externality. As a consequence, the cost of the acid rain will become a OA. social cost borne by the public, and the demand curve for electricity will shift down. OB. social cost borne by the public, and the demand curve for electricity will shift up. C. private cost borne by the utilities, and the supply curve for electricity will shift down. D. private cost borne by the utilities, and the supply curve for electricity will shift up. Question Viewer
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Consider a market with the following supply and demand. (It may help to draw a graph for these questions.) P 5 6 7 8 9 10 11 12 13 14 QS 200 300 400 500 600 700 800 900 1000 1100 QD 800 750 700 650 600 550 500 450 400 35 For the questions assume that there is a $3 external COST. 1. Now imagine that they use tradable allowances. If they cap the quantity at 400 what would the value of these allowance be in the market? (Assume the market is perfectly competitive and that "one allowance" lets you produce one unit of the good.) 2. What will they be worth if the quantity is capped at 500? 3. What if it is capped at 700?