i just need G,H,I subparts Solution 8. All-Leather is a tanning company located on Lake Michigan in Chicago. Its total cost functionis C(Q.) = 125 + 8QA + 5Q?, where Qa is leather production per week in thousands of pounds.a) If leather sells for $408 per thousand pounds, how much leather will All-Leather produce?How much profit does All-leather earn?Enjoy is a beverage company located on Lake Michigan near All-Leather in Chicago. Enjoy'sproduction of beverages is negatively affected by water pollution from All-Leather's productionof leather. Enjoy's total cost function to produce beverages isC(Q.) = 10Q£ +3Q? + 3Qx? where Qe is Enjoy's weekly production of beverages, in thousandsof gallons and, as above, Qa is All-Leather's weekly production of leather.b) Is this an example of a pecuniary externality or a real externality? Explain.c) What is the extra cost to Enjoy from an additional thousand tons of leather production by All-Leather (i.e., the external marginal cost of an extra unit of Qa produced by All-Leather)?d) What is Enjoy's private marginal cost of production?e) Beverages sell for $310 per thousand gallons. How much beverages would you predict thatEnjoy produces per week?f) How much profit does Enjoy earn in this situation?g) What is the social marginal cost of the production of leather by All-Leather? h) What is the socially optimal level of production of leather by All-Leather?i) Draw a diagram illustrating the logic of your answer in (h).j) If All-Leather produced the amount of leather given in your answer to (h), how much wouldEnjoy choose to produce?k) Given your answer to (h) and (j), how much profit would All-Leather and Enjoy each earn inthat situation?I) Why is it not socially optimal to have no production at all by All-Leather?m) How might the outcome in (h) and (j) be brought about according to Pigou?n) How might the outcome in (f) and (h) be brought about according to Coase if (I) the lawmakes All-Leather legally liable for damages resulting from its pollution, or (II) the law imposesno liability on All-Leather for the consequences of its pollution?o) All-Leather's lawyers argue against reducing its production from the level in part (a) to thelevel in (h) because that would cause job losses for tannery workers. To preserve tannery jobsin Chicago, they state, All-Leather should be allowed to keep producing at the level solved for inpart (a). What is the economic response to that statement in defense of the outcome identifiedin (h), based on a consideration of economic efficiency?

The Marginal Social Cost (MSC) is the summation of the marginal private costs of a firm and the…

Answered: h) What is the socially optimal level…

h) What is the socially optimal level of production of leather by All-Leather? i) Draw a diagram illustrating the logic of your answer in (h).

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Chapter1: Making Economics Decisions

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