The demand for cigarettes is given by Figure 1 P = 550 - 0.2Q. Price 650- Cigarettes are manufactured at a constant marginal cost of 100 and sold in a competitive market. 600- 550 What is the quantity of cigarettes sold in equilibrium? 500 450- Oprivate = 400- 350- If cigarettes generate a marginal external cost of MEC = 0.20Q, what is the socially optimal level of cigarettes? 300 250 Qsocially optimal" %3D 200 150- Using Figure 1 on the right that already shows the market demand curve to illustrate the private and social MC curves. Also, point out the private market quantity, the socially optimal quantity, and the social welfare cost. 100 50 0- 1) Using the line drawing tool, illustrate the private marginal cost curve. Label this curve as 'MC'. 400 1200 1600 2000 2400 2800 Output 800 2) Using the line drawing tool, illustrate the social marginal cost curve. Label this curve as 'MSC'. (Hint: to plot this correctly you may first want to plot the socially optimal point 'B' in step 4 below)

The demand for cigarettes is given by Figure 1 P = 550 - 0.2Q. Price 650- Cigarettes are manufactured at a constant marginal cost of 100 and sold in a competitive market. 600- 550 What is the quantity of cigarettes sold in equilibrium? 500 450- Oprivate = 400- 350- If cigarettes generate a marginal external cost of MEC = 0.20Q, what is the socially optimal level of cigarettes? 300 250 Qsocially optimal" %3D 200 150- Using Figure 1 on the right that already shows the market demand curve to illustrate the private and social MC curves. Also, point out the private market quantity, the socially optimal quantity, and the social welfare cost. 100 50 0- 1) Using the line drawing tool, illustrate the private marginal cost curve. Label this curve as 'MC'. 400 1200 1600 2000 2400 2800 Output 800 2) Using the line drawing tool, illustrate the social marginal cost curve. Label this curve as 'MSC'. (Hint: to plot this correctly you may first want to plot the socially optimal point 'B' in step 4 below)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Only typed answer You are an industry analyst that specializes in an industry where the market inverse demand is P = 100 - 3Q. The external marginal cost of producing the product is MCExternal = 6Q, and the internal cost is MCInternal = 14Q. Instruction: Round your answers to the nearest two decimal places. a. What is the socially efficient level of output? units b. Given these costs and market demand, how much output would a competitive industry produce? units c. Given these costs and market demand, how much output would a monopolist produce? units d. Which of the following are actions the government could take to induce firms in this industry to produce the socially efficient level of output. Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit. Pollution taxes…
Consider a manufactured good whose production process generates pollution. The demand for the product is Q=100-3P. The market supply function is Q=P. The marginal external cost is MEC=2Q. What is the emissions tax that needs to be imposed to achieve the social optimum? Illustrate on graph What is the economic incidence of this emissions tax? In other words, what proportion of this tax will be paid by producers of this product and what proportion of the tax will be paid by consumers?
Consider a firm that emits pollution into the air. Suppose that the marginal damage costs associated with the emissions are given by MDC -15+ 4 c, where e is the quantity of the emissions. The firm's marginal costs of abatement are given by (a) (b) 390 (c) MAC 1200 - 20 c. Determine the quantity of emissions that the firm would discharge in the absence of government policy. Determine the socially efficient level of emissions. Calculate the total costs to society for both a and b and draw a diagram illustrating these costs.
Externalities: Suppose the daily inverse demand curve for gasoline in Portland is given by P = $100 – Q, the MC = 1.5Q, and the EMC = 1.5Q. Q is measured in thousands of gallons of gasoline per day. a. Graph the demand, marginal cost, and external marginal cost functions. b. How many gallons will be consumed per day if gasoline consumers do not consider the EMC of gasoline? c. How many gallons of gasoline will be consumed per day if gasoline consumers consider the EMC.
No hand written solution Afirm has an industrial plant that emits pollutants into a town’s lake. The plant’s marginal abatement function is MAC= 200 – 0.5E and damages caused by its emissions are given by MD = 2E where emissions are in kg. per day. What is the socially efficient level of emissions from this plant? Illustrate this in a graph. As an incentive to reduce emissions to the socially efficient level, government offers to pay the firm for each kg. of emissions it abates per day from this plant. What subsidy per kg. should the government offer? If the plant abates to the socially efficient level of emissions, what total subsidy payment would the firm receive? Identify the area in your graph. How much better or worse off would the firm be compared to if it did no abating? Identify the area in your graph. What would be the net benefit to society if we pay the firm to reduce the plant’s emissions to the socially efficient level? Identify this area in your graph.
Refer to Figure. Which of the following statements is correct? Price 22 24 22 81 18 16 Social cost (private cost and external cost) Supply (private cost) Demand (private value) 120 160 Quantity a. The private cost of producing the 160th unit of output is $16 b. The social cost of producing the 160th unit of output is $22. c. d. The external cost of producing the 160th unit of output is $6. All of the above are correct.
Is the answer A B C or D?
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