2 HelpNegative Externalities Exercise 1 (Algo)Texarkana Electric Company burns coal to heat the water that drives its electricity-producing turbines. The table below shows themarginal benefit of annual electricity consumption and the private marginal cost of annual electricity production.Marginal Cost and Marginal BenefitQuantity (miilions ofmegavatts)MprivateMCprivateMCerternalMCsocial0.5$155$951.01401001.51251052.01101102.5951153.070120Instructions: In parts a and b, enter your answers as a whole number. In part c, round your answer to one decimal place.a. What is "private quantity" of electricity Texarkona Electric Company will produce each year?2.0 million megawatts per yearNow assume the production of electricity also produces sulfur dioxide (a precursor to acid rain). The external cost of the sulfur dioxideincreases by $20 for each 0.5 million megawatts produced.b. Fill in the external marginal cost (MCexternal and the social marginal cost (MCsociah columns in the table above.c. What is the socially optimal amount of electricity for Texarkana to produce if all costs and benefits are considered?million megawatts per year

"A negative externality measures the difference between the private cost of an economic action and…

Negative Externalities Exercise 1 (Algo) Texarkana Electric Company burns coal to heat the water that drives its electricity-producing turbines. The table below shows the marginal benefit of annual electricity consumption and the private marginal cost of annual electricity production. Marginal Cost and Marginal Benefit Quantity (millions of Nprivate $155 megavatta) HCprivate $95 MCexternal Csocial 0.5 1.0 140 100 1.5 125 105 2.0 110 110 2.5 95 115 3.0 70 120 Instructions: In parts a and b, enter your answers as a whole number. in part c, round your answer to one decimal place. o. What is "private quantity" of electricity Texarkona Electric Company will produce cach year? 2.0 million megawatts per year Now assume the production of electricity also produces sulfur dioxide (a precursor to acid rain). The external cost of the sulfur dioxide increases by $20 for each 0.5 million megawatts produced. b. Fill in the external marginal cost (MCexternad and the social marginal cost (MCsocial columns in the table above. c. What is the socially optimal amount of electricity for Texarkana to produce if all costs and benefits are considered? million megawatts per year

Negative Externalities Exercise 1 (Algo) Texarkana Electric Company burns coal to heat the water that drives its electricity-producing turbines. The table below shows the marginal benefit of annual electricity consumption and the private marginal cost of annual electricity production. Marginal Cost and Marginal Benefit Quantity (millions of Nprivate $155 megavatta) HCprivate $95 MCexternal Csocial 0.5 1.0 140 100 1.5 125 105 2.0 110 110 2.5 95 115 3.0 70 120 Instructions: In parts a and b, enter your answers as a whole number. in part c, round your answer to one decimal place. o. What is "private quantity" of electricity Texarkona Electric Company will produce cach year? 2.0 million megawatts per year Now assume the production of electricity also produces sulfur dioxide (a precursor to acid rain). The external cost of the sulfur dioxide increases by $20 for each 0.5 million megawatts produced. b. Fill in the external marginal cost (MCexternad and the social marginal cost (MCsocial columns in the table above. c. What is the socially optimal amount of electricity for Texarkana to produce if all costs and benefits are considered? million megawatts per year

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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