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 megawatts) 0.5 1.0 1.5 2.0 2.5 3.0 MB private $125 110 95 80 65 40 MC private $65 70 75 80 85 90 $ MC external MC social $ Instructions: 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 Texarkana Electric Company will produce each year? 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 $60 for each 0.5 million megawatts produced. b. Fill in the external marginal cost (MCexternal) 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

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 megawatts) 0.5 1.0 1.5 2.0 2.5 3.0 MB private $125 110 95 80 65 40 MC private $65 70 75 80 85 90 $ MC external MC social $ Instructions: 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 Texarkana Electric Company will produce each year? 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 $60 for each 0.5 million megawatts produced. b. Fill in the external marginal cost (MCexternal) 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

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter13: Positive Externalities And Public Goods

Section: Chapter Questions

Problem 24P: Assume that the marginal private costs of a film producing fuel-efficient can; is greater than the...

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Marginal Cost and Marginal Benefit Quantity (millions of megawatts) 0.5 1.0 1.5 2.0 2.5 3.0 MB private $130 115 100 85 70 45 MC private $70 75 80 85 90 95 MC external $ $ MC social Instructions: 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 Texarkana Electric Company will produce each year? 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 $40 for each 0.5 million megawatts produced. b. Fill in the external marginal cost (MC external 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
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