Include correctly labeled diagrams, if useful or required, in explaining your answers. Acorrectly labeled diagram must have all axes and curves clearly labeled and must showdirectional changes. If the question prompts you to "Calculate," you must show how youarrived at your final answer.Suppose a good is produced in a perfectly competitive market. In this market the marginalsocial benefit (MSB) exceeds the marginal private benefit (MPB) at every quantity. Themarginal social cost (MSC) equals the marginal private cost (MPC) at every quantity.(a) Draw a correctly labeled graph of the MSB, MPB, MSC, and MPC curves and showeach of the following.(i) The market equilibrium quantity, labeled QM(ii) The socially optimal quantity, labeled Qs(iii) The deadweight loss at the market equilibrium, shaded completely(b) Suppose the government is considering two proposals to make consumers internalize theconsumption externality.• Proposal I: Imposing a binding price ceiling• Proposal II: Granting a per-unit subsidy to consumers(i) Compared to the market equilibrium in part (a), would the deadweight loss increase,decrease, or remain the same under Proposal I? Explain.(ii) Compared to the market equilibrium in part (a), would the quantity producedincrease, decrease, or remain the same under Proposal II? Explain.

Externalities: When a firm produces a good sometimes it creates cost or benefits for other firms. If…

Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate, you must show how you arrived at your final answer. Suppose a good is produced in a perfectly competitive market. In this market the marginal social benefit (MSB) exceeds the marginal private benefit (MPB) at every quantity. The marginal social cost (MSC) equals the marginal private cost (MPC) at every quantity. (a) Draw a correctly labeled graph of the MSB, MPB, MSC, and MPC curves and show each of the following. (1) The market equilibrium quantity, labeled QM (ii) The socially optimal quantity, labeled Qs (iii) The deadweight loss at the market equilibrium, shaded completely

Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate, you must show how you arrived at your final answer. Suppose a good is produced in a perfectly competitive market. In this market the marginal social benefit (MSB) exceeds the marginal private benefit (MPB) at every quantity. The marginal social cost (MSC) equals the marginal private cost (MPC) at every quantity. (a) Draw a correctly labeled graph of the MSB, MPB, MSC, and MPC curves and show each of the following. (1) The market equilibrium quantity, labeled QM (ii) The socially optimal quantity, labeled Qs (iii) The deadweight loss at the market equilibrium, shaded completely

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.1P

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