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.
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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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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