In the market for widgets, consumers have a market demand (marginal benefit) curve of P = MB = 250- Q. In this problem, there is no distinction between private and social marginal benefit. The widget suppliers have a market supply (private marginal cost) curve of P = MC Private = 100+ Q. The production of widgets generates a negative externality in the form of pollution, with marginal external cost of X = 50. Due to this externality, there will be a difference between private and social marginal cost. Questions Analyze the following scenarios describing possible outcomes in the market for widgets. Efficient Outcome Find the equation for social marginal cost (MCSocial), using the information above. Determine the efficient quantity (Q*). AGEC 3503 ● 1 HW7 - Negative Externalities Calculate the joint surplus (JS"), total external cost (TX"), and the total surplus (TS*) based on the efficient quantity.

In the market for widgets, consumers have a market demand (marginal benefit) curve of P = MB = 250- Q. In this problem, there is no distinction between private and social marginal benefit. The widget suppliers have a market supply (private marginal cost) curve of P = MC Private = 100+ Q. The production of widgets generates a negative externality in the form of pollution, with marginal external cost of X = 50. Due to this externality, there will be a difference between private and social marginal cost. Questions Analyze the following scenarios describing possible outcomes in the market for widgets. Efficient Outcome Find the equation for social marginal cost (MCSocial), using the information above. Determine the efficient quantity (Q). AGEC 3503 ● 1 HW7 - Negative Externalities Calculate the joint surplus (JS"), total external cost (TX"), and the total surplus (TS) based on the efficient quantity.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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