Greater air pollution from car production leads to increased rates of asthma and infant mortality, imposing costs on the rest of society. The inverse demand for cars is given by the function P=100-5q while the private costs are given by the function P=20+5q. Additionally, we know that each car imposes a $10 per-unit external cost on society. What is the socially optimal number of cars produced?
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- The private marginal benefit associated with a product’s consumption is PMB = 360 – 4Q and the private marginal cost associated with its production is PMC = 6Q. Further- more, the marginal external damage associated with this good’s production is MD = 2Q. To correct the externality, the government decides to impose a tax of T per unit sold. What tax T should it set to achieve the social optimum?An unregulated monopoly firm bottles a product called “Panacea”, a unique health product that has no substitutes. The monopoly firm has a marginal cost curve that follows the equation P = 50 + Q. The market demand for the product follows the equation P = 200 – Q. The firm currently sells 50 bottles per month at a price of $150. What is the socially efficient number of bottles of “Panacea” and at what price could the efficient number of bottles be sold? What is a method the government can use to correct the inefficiencies of a market? Explain how that method will improve the market’s outcome.The private marginal benefit associated with a product’s consumption is PMB = 360–4Q and the private marginal cost associated with its production is PMC = 6Q. Furthermore, the marginal external damage associated with this good’s production is MD =2Q. To correct the externality, the government decides to impose a tax of T per unit sold. What tax T should it set to achieve the social optimum?
- Market supply curve S and private demand curve Dp represent the market for vaccinations. Equilibrium is at point e, and the number of people getting the vaccination is Qe. Society would benefit, however, if more people would get the vaccination. Demand curve DS represents the marginal social benefit (MSB), which includes the private demand for vaccinations plus the external benefits that flow from it. Socially optimal enrollment would be Q1 (point f). Society would benefit the most by consuming Q1 of the vaccination. As a result, the government needs to enact public policy to get the quantity in the vaccination market to Q1. What policy/policies can the government enact to get the Covid-19 vaccination to quantity Q1? Check all that apply. A. Tax the consumer, who is buying the vaccination B. Provide a subsidy for the vaccination C. Impose a regulation, requiring the people of the nation to get the vaccination D. Tax the producer, who is selling the vaccination E. Government produces…The private marginal benefit associated with a product's consumption is PM B = 350 – 4Q and the private marginal cost associated with its production is PMC = 6Q. Furthermore, the marginal external damage associated with this good's production is MD 4Q. To correct the externality, the government decides to impose a tax of T per unit sold. What tax T should it set to achieve the social optimum?Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Pe and Qe. On the graph, shade in the deadweight loss at the market output.
- The forge produces iron (x) with the cost function C (x) = 31x², while it can sell the iron at the competitive price $19. The farmer produces apples (y) with the cost function C, (x, y) = 4y? + 2xy, while it can sell the apples at the competitive price $14. If the government wants to tax the forge to incentivize it to produce the socially optimal amount, how much should the government tax the forge per unit of iron produced? Round your answer to 2 decimal points. Answer:The “demand” (MB) curve for pollution abatement would be given by the pollution damages that could be avoided by each successive unit of abatement. There are likely to be declining marginal benefits from each additional unit of abatement. The marginal cost of abatement is likely to start small, and then grow, yielding increasing marginal abatement costs from each additional unit of abatement. The socially efficient amount of abatement would be given by the intersection of the falling marginal benefit (avoided damages) curve and the rising marginal abatement cost curve. However, unregulated firms can often simply ignore the damages caused by the pollution they create. a. Illustrate the marginal private benefit curve, as perceived by the firm, if they don’t have to think about their pollution at all, and show the firm’s privately efficient amount of abatement. b. If the regulatory agency sets a standard for expected levels of abatement, and charges the firm a huge fine per unit if…In economics, the socially efficient rate of output is achieved when the marginal cost (MC) of producing an additional unit equals the marginal benefit(MB) that socially receives from consuming that additional unit. This is known as the MC=MB rule. In this case, the marginal cost is constant at $5 per item, which means that the cost of producing each additional item is always $5. The socially efficient rate of output is where the marginal cost equals the marginal benefit. Since the marginal cost is constant at $5 per item, the socially efficient rate of output is when the marginal benefit is also $5. Please demonstrate the graph for above-mentioned statement
- A government study has concluded that the marginal benefits from controlling cow-induced methane production are given by MB = 100 – R where R represents the percentage reduction from unregulated levels. The marginal cost to farmers of methane reduction (through better cow feed) is given by MC = 20 + R a) What is the socially optimal level of methane reduction? [Hint: Let MB=MC] b) If the government were to adopt a methane fee that farmers must pay for each percent of methane they do not reduce, how should this fee be set to achieve the optimal level of R? {Hint: This fee will be reflected in the MC to the firm] c) Suppose there are two farmers in this market with differing costs of methane reduction. The first has marginal costs given by MC1 = 20 + 2/3 R1 whereas the second has marginal costs given by MC2 = 20 +2R2 Total methane reduction is the average from these two farms. If the government mandates that each farm reduce methane by the optimal percentage calculated in part a), what…Three families live around Lake Robert. Each family i has a marginal benefit from seeing q fireworks of MB(qi) = 12 − 2qi to see fireworks, which are non-rival and non-excludable. So, qi is the number of fireworks seen by a family i. Each firework set off costs $6 per unit, which represents the marginal social cost of provision. Assume a first firework is lit. What is the benefit to your family? What is the total benefit to all families? Assume a second firework is lit. What is the benefit to your family from this second firework? To all families? What is the Marginal Social Benefit function (that is, the function giving the marginal benefit for society as a function of quantity)? To check yourself, make sure that if you plug 1 or 2 into your function, you should get the values you found in the last 2 questions. What is the efficient (total surplus maximizing) quantity of fireworks? Is the efficient quantity different from what ended up happening in (e) (the privately…Suppose that speeding imposes externalities on other people resulting in a social cost of $50. A town is considering hiring an extra police officer to give out speeding tickets. If we want to maximize social welfare (absent enforcement costs), which of the following statements are true? (Assume risk neutral drivers.) What happens to the socially optimal cost of the speeding ticket if the town decides to hire the police officer? a) It goes down b) It goes up c) The amount that it goes down depends on salary of the police officer d) The amount if goes up depends on the salary of the police officer e) None of the above