The annual private supply and demand for cars in the United States is given in the figure below. Price (S) 50,000 45,000 40,000 35,000 MC pvt MC social Tools DWL •:g 30,000 25,000 MB 20,000 15,000 10,000 5,000 0 4 4 8 12 16 20 24 28 32 36 40 Millions of cars a. Suppose driving a car causes a $7,500/car external cost on nondrivers. Draw the social benefit curve that accounts for the external cost associated with driving. Instructions: Use the tool provided (MBsocial) and plot only the endpoints over the range 0-32 b. The efficient number of cars is [ million cars. If the government does not intervene in this market. [ million cars (Click to select) are purchased. c. Draw the deadweight loss that occurs in this market if there is no government intervention. Instructions: Use the tool provided (DWL) to draw the deadweight loss.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The annual private supply and demand for cars in the United States is given in the figure below.
Price (S)
50,000
45,000
40,000
Tools
MC -MC
pvt
social
MB social
DWL
35,000
30,000
25,000
MB
20,000
pvt
15,000
10,000
5,000
0
4 8
12 16 20 24 28 32 36 40
Millions of cars
a. Suppose driving a car causes a $7,500/car external cost on nondrivers. Draw the social benefit curve that accounts for the external
cost associated with driving.
Instructions: Use the tool provided (MBsocial) and plot only the endpoints over the range 0-32
b. The efficient number of cars is
million cars. If the government does not intervene in this market.
million cars
(Click to select) ▼are purchased.
c. Draw the deadweight loss that occurs in this market if there is no government intervention.
Instructions: Use the tool provided (DWL) to draw the deadweight loss.
Transcribed Image Text:The annual private supply and demand for cars in the United States is given in the figure below. Price (S) 50,000 45,000 40,000 Tools MC -MC pvt social MB social DWL 35,000 30,000 25,000 MB 20,000 pvt 15,000 10,000 5,000 0 4 8 12 16 20 24 28 32 36 40 Millions of cars a. Suppose driving a car causes a $7,500/car external cost on nondrivers. Draw the social benefit curve that accounts for the external cost associated with driving. Instructions: Use the tool provided (MBsocial) and plot only the endpoints over the range 0-32 b. The efficient number of cars is million cars. If the government does not intervene in this market. million cars (Click to select) ▼are purchased. c. Draw the deadweight loss that occurs in this market if there is no government intervention. Instructions: Use the tool provided (DWL) to draw the deadweight loss.
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