G.244. 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 (millions ofmegawatts)1.02.03.04.05.06.0MB private MC private MC external MC social$$$145$8513011510085609095100105110Instructions: Enter your answers as a whole number.a. What is "private quantity" of electricity Texarkana Electric Company will produce each year?million megawatts per yearNow assume the production of each million megawatts of electricity also produces sulfur dioxide (a precursor to acid rain). Theexternal cost of the sulfur dioxide is $20 per million megawatts of electricity production.b. Fill in the external marginal cost (MCexternal) and the social marginal cost (MC social 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

Basic introduction Externality is the cost or benefit that the market transaction brings to the…

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.

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.

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

G.244.

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)
1.0
2.0
3.0
4.0
5.0
6.0
MB private MC private MC external MC social
$
$
$145
$85
130
115
100
85
60
90
95
100
105
110
Instructions: Enter your answers as a whole number.
a. What is "private quantity" of electricity Texarkana Electric Company will produce each year?
million megawatts per year
Now assume the production of each million megawatts of electricity also produces sulfur dioxide (a precursor to acid rain). The
external cost of the sulfur dioxide is $20 per million megawatts of electricity production.
b. Fill in the external marginal cost (MCexternal) and the social marginal cost (MC social 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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