Please solve for d) e) and f). Now assume that and the market supply of sugar be given by the functionP=2+0.5Q[assume that MPC = 2 + 0.5Q]d. What is the free-market equilibrium price and quantity of sugar? Show your work.e. Suppose that the production of sugar leads to pollution. This pollution is creating aMarginal External Costs (MEC) of $4 per unit of sugar produced. For simplicity, theMEC is constant. Given this external cost, what would the Marginal Social Cost (MSC)function be?f. Given the MSC identified in part (e), what is the socially efficient quantity of sugarproduction? What about the socially efficient price? How does this new quantity and itsassociated price compare to the market outcome without intervention?

MPC stands for the Marginal Propensity to Consume, which measures the change in consumer spending…

Now assume that and the market supply of sugar be given by the function P=2+0.5Q [assume that MPC = 2 + 0.5Q] d. What is the free-market equilibrium price and quantity of sugar? Show your wo e. Suppose that the production of sugar leads to pollution. This pollution is creatin Marginal External Costs (MEC) of $4 per unit of sugar produced. For simplicity MEC is constant. Given this external cost, what would the Marginal Social Cost function be? f. Given the MSC identified in part (e), what is the socially efficient quantity of su; production? What about the socially efficient price? How does this new quantit associated price compare to the market outcome without intervention?

Now assume that and the market supply of sugar be given by the function P=2+0.5Q [assume that MPC = 2 + 0.5Q] d. What is the free-market equilibrium price and quantity of sugar? Show your wo e. Suppose that the production of sugar leads to pollution. This pollution is creatin Marginal External Costs (MEC) of $4 per unit of sugar produced. For simplicity MEC is constant. Given this external cost, what would the Marginal Social Cost function be? f. Given the MSC identified in part (e), what is the socially efficient quantity of su; production? What about the socially efficient price? How does this new quantit associated price compare to the market outcome without intervention?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Please solve for d) e) and f).

Now assume that and the market supply of sugar be given by the function
P=2+0.5Q
[assume that MPC = 2 + 0.5Q]
d. What is the free-market equilibrium price and quantity of sugar? Show your work.
e. Suppose that the production of sugar leads to pollution. This pollution is creating a
Marginal External Costs (MEC) of $4 per unit of sugar produced. For simplicity, the
MEC is constant. Given this external cost, what would the Marginal Social Cost (MSC)
function be?
f. Given the MSC identified in part (e), what is the socially efficient quantity of sugar
production? What about the socially efficient price? How does this new quantity and its
associated price compare to the market outcome without intervention?

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