Following graph is of the refined petroleum market we have considered in class (MEC is the marginal external cost to recreational users; Mл is the marginal profit of the refinery). $ per barrel A B D 0 MEC 0 of barrels) QE Q (thousands Μπ Identify the economic interpretations of each of the labeled areas, A, B, C, and D, by matching each labeled area to one of the following four options: (i) Total amount of environmental damage associated with producing the efficient output level; (ii) (iii) (iv) The net gain accruing to recreational users by getting the refineries to reduce output from the competitive level to the efficient level; Loss of profit for petroleum refiners from reducing output from the competitive to the efficient level; Net gain accruing to petroleum refineries of producing at the efficient level. A B D

Following graph is of the refined petroleum market we have considered in class (MEC is the marginal external cost to recreational users; Mл is the marginal profit of the refinery). $ per barrel A B D 0 MEC 0 of barrels) QE Q (thousands Μπ Identify the economic interpretations of each of the labeled areas, A, B, C, and D, by matching each labeled area to one of the following four options: (i) Total amount of environmental damage associated with producing the efficient output level; (ii) (iii) (iv) The net gain accruing to recreational users by getting the refineries to reduce output from the competitive level to the efficient level; Loss of profit for petroleum refiners from reducing output from the competitive to the efficient level; Net gain accruing to petroleum refineries of producing at the efficient level. A B D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Hand written solutions not allowed

Following graph is of the refined petroleum market we have considered in class (MEC
is the marginal external cost to recreational users; Mл is the marginal profit of the
refinery).
$ per barrel
MEC
A
D
B
C
0
QE
QC
Q (thousands
Μπ
of barrels)
Identify the economic interpretations of each of the labeled areas, A, B, C, and D, by
matching each labeled area to one of the following four options:
(i) Total amount of environmental damage associated with producing the
efficient output level;
(ii)
(iii)
(iv)
The net gain accruing to recreational users by getting the refineries to
reduce output from the competitive level to the efficient level;
Loss of profit for petroleum refiners from reducing output from the
competitive to the efficient level;
Net gain accruing to petroleum refineries of producing at the efficient
level.
A
B _
C
Ꭰ

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