Given the position of the MSC curve, once can conclude that the PRICE OF GOOD X P₂ P₁ - H Q₁ Q₂ Q₂ Marginal Social Cost Marginal Private Cost Marginal Social Benefit QUANTITY OF GOOD X O production of Good X occurs in an imperfectly competitive market O market quantity Q3 is the socially optimal quantity O production of Good X creates a negative externality O free market will produce too little of Good X private costs of producing Good X exceed the social cost of production at all levels of output

Given the position of the MSC curve, once can conclude that the PRICE OF GOOD X P₂ P₁ - H Q₁ Q₂ Q₂ Marginal Social Cost Marginal Private Cost Marginal Social Benefit QUANTITY OF GOOD X O production of Good X occurs in an imperfectly competitive market O market quantity Q3 is the socially optimal quantity O production of Good X creates a negative externality O free market will produce too little of Good X private costs of producing Good X exceed the social cost of production at all levels of output

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The graph shows the unregulated market for electricity. Suppose that at every quantity produced, the marginal external cost of electricity equals the marginal private cost of production. To show the market outcome, draw the following four items on the graph: 1. Draw a point to show the marginal social cost when the utility produces 500 kilowatts per day. Label it 1. 2. Draw the marginal social cost curve. Label it MSC . 3. Draw a point to show the electricity produced and its marginal social cost. Label it 2. 4. Draw a shape to show the deadweight loss created. Label it DWL . >>> Draw only the objects specified in the question.
The following graph shows market equilibrium of paper production. There are negative externalities in production and the Marginal External Cost is $5 per unit. We need to find the efficient allocation point. P 0 i. Do we correct the Marginal Social Benefit or Marginal Social Cost, and how? ii. Draw the corrected curve of MSB or MSC and mark the efficient point e. (Draw on paper. Take a photo and attach or send via email.) S D Q Attempt 4 Minu Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Use the following to answer questions 7-8: Figure: Positive Externalities and Production of Semiconductor Chips Price, marginal | social benefit of chip $55 50 45 40 35 30 25 20 15 10 100 200 300 400 500 600 700 800 900 Quantity of chips 7. (Figure: Positive Externalities and Production of Semiconductor Chips) If the marginal external benefit of producing a chip is $20, then the socially optimal quantity of chips is and the socially optimal price is A) 200; $20 B) 300; $25 C) 500; $35 D) 600; $40 8. (Figure: Positive Externalities and Production of Semiconductor Chips) If the socially optimal production of chips is 500, the government could achieve the socially optimal level of production by granting a Pigouvian subsidy of: A) $5. B) $10. C) $15.
Air pollution creates a negative externality—a cost suffered by a third party as a result of an economic transaction. A standard solution to a negative externality is a Pigouvian tax, a tax that raises the marginal private cost of pollution emissions to the level of the marginal social cost. The socially optimal quantity of pollution emissions is then determined by the intersection of the marginal private benefit, or demand, curve and the marginal social cost curve. The article notes that "putting a dollar value on the benefits of cleaner air has been difficult." Assuming this problem has been resolved, in the accompanying diagram, move the endpoints of line Smarginal social cost to show the marginal social cost curve. Then move the line labeled "Tax" to show the amount of the tax needed to limit emissions to the socially optimal level.
Consider a manufactured good whose production process generates pollution. The demand for the product is Q=100-3P. The market supply function is Q=P. The marginal external cost is MEC=2Q. What is the emissions tax that needs to be imposed to achieve the social optimum? Illustrate on graph What is the economic incidence of this emissions tax? In other words, what proportion of this tax will be paid by producers of this product and what proportion of the tax will be paid by consumers?
When does a subsidy that benefits consumers result in a more efficient allocation of a resource? A when the good being produced or consumed is not scarce B when the good being produced or consumed generates a negative externality when the good being produced or consumed generates a positive externality D when the equilibrium price of the good is one that consumers don't like
4. Suppose the supply curve of portable radio rentals in Golden Gate Park is given by P= 5+ 0.1Q and the demand curve is by P = 20 -0.2Q. a. If each portable radio imposes $3 per day in noise costs on others, by how much will the market equilibrium quantity exceed the socially optimal number of rentals? b. How would the imposition of a $3 per unit tax affect the efficiency in this market?
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.
Time left 0:16:1 Suppose that elementary education creates a positive externality. If the government does not subsidize education, then Select one: the equilibrium quantity of education will be less than the socially optimal quantity of O a. education O b. the equilibrium quantity of education is optimal the equilibrium quantity of education will be greater than the socially optimal quantity of education C. Od. the equilibrium quantity of education will be equal to the socially optimal quantity of education Next page page r on this page
2. Table: The following table shows the private value, private cost, and social value for a market with a positive externality. Quantity Private Value Private Cost Social Value 27 6 34 12 24 10 31 13 21 14 28 14 18 18 25 15 15 22 22 12 26 19 a. What is the market equilibrium quantity of output for this product? b. What is the socially-optimal level of output in this market? c. How large would a per unit subsidy need to be in this market to move the market from the equilibrium level of output to the socially-optimal level of output?
A positive externality will cause a market to produce Select one: more than is socially desirable. O b. more than the same market would produce in the presence of a negative externality. O c. less than is socially desirable. O d. the socially optimal equilibrium amount. a.
8: Consider the market for alcohol. The demand for alcohol is given by the inverse demand function p = 1500 – 10Q The market cost function for firms that sell alcohol is C"(Q) = 300Q + 10Q² Alcohol consumption sometimes produces negative externalities, such as drunk driv- ing, health costs, or violent behavior. The social cost of these externalities is C°(Q) = 5Q? %3D Note that both CP(Q) and C9(Q) are cost functions, not marginal cost functions. (3) How much deadweight loss is there at the competitive equilibrium? Draw a graph to support your answer. (4) Now suppose there is a monopolist that sells alcohol. How much is produced by the monopolist? Is an unregulated competitive market or an unregulated monopolist better (in terms of social welfare) in this case?