Let Q be quantity of beer (in packs) consumed in the US. Assume beer consumption imposes a negative externality of $30 per pack. The private demand for beer while the private supply curve is P=Q. If the government impose a $30 tax per pack of beer, what is the change in total surplus from before to after the imposition $150 $1,350 $150 $1,350 A Moving to another question will save this response. «< Question Close

Let Q be quantity of beer (in packs) consumed in the US. Assume beer consumption imposes a negative externality of $30 per pack. The private demand for beer while the private supply curve is P=Q. If the government impose a $30 tax per pack of beer, what is the change in total surplus from before to after the imposition $150 $1,350 $150 $1,350 A Moving to another question will save this response. «< Question Close

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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#25, #26, #27
3. The effect of negative externalities on the optimal quantityof consumption Consider the market for paper. Suppose that a paper factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additional ton of paper imposes a constant external cost of $315 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for paper. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $315 per ton. (? 900 810 Social Cost 720 630 540 450 Supply (Private Cost) 360 270 Demand 180 (Private Value) 90 1 2 6 QUANTITY (Tons of paper) The market equilibrium quantity is v tons of paper, but the socially optimal quantity of paper production is v tons. To create an incentive for the firm to produce the socially optimal quantity of paper, the government could impose a of S per ton of paper. PRICE (Dollars perton of paper)
1. The graph below illustrates the marginal abatement cost curve for a firm's carbon dioxide emissions. T° MAC A B E E₁ Carbon Dioxide Suppose that the EPA imposes an emissions tax with a per-unit charge of T* on carbon dioxide emissions. Which of the following statements are true? (Check each that is true) The tax bill to the firm will be given by the area A + B. The firm will choose to reduce emissions by (Eo - E*) units. Total abatement costs to the firm are equal to T*. Total abatement costs plus the tax bill to the firm is given by the area B + C. The firm will prefer a performance standard of E* units over this emissions tax policy.
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3. The effect of negative externalities on the optimal quantityof consumption Consider the market for paper. Suppose that a paper factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additional ton of paper imposes a constant external cost of $385 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for paper. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $385 per ton. PRICE (Dollars per ton of paper) 1100 990 880 770 660 550 440 330 220 110 0 0 ☐ 1 ☐ 2 3 4 5 QUANTITY (Tons of paper) O n Supply 8 (Private Cost) Demand (Private Value) 7 Social Cost (?) The market equilibrium quantity is tons of paper, but the socially optimal quantity of paper production is To create an incentive for the firm to produce the socially optimal quantity of paper, the government could impose a of paper. tons. of $ per ton
3. The effect of negative externalities on the optimal quantityof consumption Consider the market for paper. Suppose that a paper factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additional ton of paper imposes a constant external cost of $450 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for paper. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $450 per ton, 1500 PRICE (Dollars per ton of paper) 1350 1200 1050 900 750 600 450 300 150 0 D O QUANTITY (Tons of paper) Supply (Private Cost) The market equilibrium quantity is Demand (Private Value) Social Cost tons of paper, but the socially optimal quantity of paper production is To create an incentive for the firm to produce the socially optimal quantity of paper, the government could impose a of paper. tons. per ton
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P $16 $10 $7 $5 50 $0 20 30 30 D S If this market is in equilibrium (without any government interference), what is the Total Social Surplus? EI O $25 O $135 O $240 ○ $480 200m 2
O Macmillan Learning Using the information in the graph, answer the three questions. What is the value of the efficient per-unit tax at the socially optimal equilibrium? What are tax revenues at the socially optimal equilibrium, in millions? Price and cost (per pound) $20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 1 I 1 1 1 L 1 1 1 1 T per-unit tax: $ T F T tax revenues: $ 1 1 i 1 T 1 1 1 1 T T I I I Social marginal cost Private marginal cost 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Fertilizer (millions of pounds per year) Demand
Only typed answer You are an industry analyst that specializes in an industry where the market inverse demand is P = 100 - 3Q. The external marginal cost of producing the product is MCExternal = 6Q, and the internal cost is MCInternal = 14Q. Instruction: Round your answers to the nearest two decimal places. a. What is the socially efficient level of output? units b. Given these costs and market demand, how much output would a competitive industry produce? units c. Given these costs and market demand, how much output would a monopolist produce? units d. Which of the following are actions the government could take to induce firms in this industry to produce the socially efficient level of output. Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit. Pollution taxes…
Which statement about externalities is wrong? O Markets are typically not efficient in dealing with externalities O Externalities can be positive or negative O A firm naturally takes into account negative externalities that result from their production O Interventions such as carbon taxes can help correct externalities gative externalities imply that the social cost is high than the internal (or private) cost
3. The effect of negative externalities on the optimal quantityof consumption Consider the market for pharmaceuticals. Suppose that a pharmaceutical factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing additional pharmaceuticals imposes a constant per-unit external cost of $280. The following graph shows the demand (private value) curve and the supply (private cost) curve for pharmaceuticals. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $280 per unit. PRICE (Dollars per unit of pharmaceuticals) 800 720 640 560 480 400 320 240 160 80 O 1 2 3 □ O O ㅁ 4 Supply (Private Cost) Demand (Private Value) 5 6 7 QUANTITY (Units of pharmaceuticals) Social Cost ? The market equilibrium quantity is units of pharmaceuticals, but the socially optimal quantity of pharmaceuticals production is units. To create an incentive for the firm to produce the socially optimal…