Suppose a perfectly competitive firm faces an inverse demand curve of P(Q)= 1515-1.4Q and has private marginal costs estimated to be: MCP (Q) = 10 +1.4Q. What is the perfectly competitive equilibrium price and quantity in this market? Quantity: 537.50. (Enter your answer rounded to two decimal places and use in subsequent calculations.) Price: $762.50. (Enter your answer rounded to two decimal places and use in subsequent calculations.) Suppose the firm's production process produces environmental toxins. There is an additional social cost that is not accounted for in the firm's private marginal cost function. Suppose that once accounting for the toxins, the social marginal cost is: MCS (Q) = 10 + 2.1Q. What are the socially optimal price and quantity in this market? Quantity: 430.00. (Enter your answer rounded to two decimal places and use in subsequent calculations.) Price: $913.00. (Enter your answer rounded to two decimal places and use in subsequent calculations.) Since there is a negative externality in this market, the efficient allocation is at the social optimum. However, without government intervention the producers will optimize according to their private marginal cost functions and the market will be in its perfectly competitive equilibrium instead. Calculate the deadweight loss associated with the perfectly competitive equilibrium. The perfectly competitive equilibrium results in a deadweight loss of: $ 20223.44. (Enter your answer rounded to two decimal places.) Suppose that the government imposes a specific tax on producers so that they internalize the externality. What specific tax would lead this market to its social optimum? $ 301.00. (Enter your answer rounded to two decimal places.)
Suppose a perfectly competitive firm faces an inverse demand curve of P(Q)= 1515-1.4Q and has private marginal costs estimated to be: MCP (Q) = 10 +1.4Q. What is the perfectly competitive equilibrium price and quantity in this market? Quantity: 537.50. (Enter your answer rounded to two decimal places and use in subsequent calculations.) Price: $762.50. (Enter your answer rounded to two decimal places and use in subsequent calculations.) Suppose the firm's production process produces environmental toxins. There is an additional social cost that is not accounted for in the firm's private marginal cost function. Suppose that once accounting for the toxins, the social marginal cost is: MCS (Q) = 10 + 2.1Q. What are the socially optimal price and quantity in this market? Quantity: 430.00. (Enter your answer rounded to two decimal places and use in subsequent calculations.) Price: $913.00. (Enter your answer rounded to two decimal places and use in subsequent calculations.) Since there is a negative externality in this market, the efficient allocation is at the social optimum. However, without government intervention the producers will optimize according to their private marginal cost functions and the market will be in its perfectly competitive equilibrium instead. Calculate the deadweight loss associated with the perfectly competitive equilibrium. The perfectly competitive equilibrium results in a deadweight loss of: $ 20223.44. (Enter your answer rounded to two decimal places.) Suppose that the government imposes a specific tax on producers so that they internalize the externality. What specific tax would lead this market to its social optimum? $ 301.00. (Enter your answer rounded to two decimal places.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose a perfectly competitive firm faces an inverse demand curve of P(Q)=1515-1.4Q and has private marginal costs
estimated to be: MC° (Q) = 10 + 1.4Q.
What is the perfectly competitive equilibrium price and quantity in this market?
Quantity: 537.50. (Enter your answer rounded to two decimal places and use in subsequent calculations.)
Price: $762.50. (Enter your answer rounded to two decimal places and use in subsequent calculations.)
Suppose the firm's production process produces environmental toxins. There is an additional social cost that is not accounted for in the firm's
private marginal cost function. Suppose that once accounting for the toxins, the social marginal cost is: MC³ (Q) = 10 + 2.1Q.
What are the socially optimal price and quantity in this market?
Quantity: 430.00. (Enter your answer rounded to two decimal places and use in subsequent calculations.)
Price: $913.00. (Enter your answer rounded to two decimal places and use in subsequent calculations.)
Since there is a negative externality in this market, the efficient allocation is at the social optimum. However, without government intervention,
the producers will optimize according to their private marginal cost functions and the market will be in its perfectly competitive equilibrium
instead. Calculate the deadweight loss associated with the perfectly competitive equilibrium.
The perfectly competitive equilibrium results in a deadweight loss of: $ 20223.44. (Enter your answer rounded to two decimal places.)
Suppose that the government imposes a specific tax on producers so that they internalize the externality.
What specific tax would lead this market to its social optimum? $301.00. (Enter your answer rounded to two decimal places.)
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