Homework Help is Here – Start Your Trial Now!
Business
Economics
The demand for cigarettes is given by P = 500 -0.2Q. Cigarettes are manufactured at a constant marginal cost of 50 and sold in a competitive market. What is the quantity of cigarettes sold in equilibrium? Qprivate = 2250 If cigarettes generate a marginal external cost of MEC = 0.05Q, what is the socially optimal level of cigarettes? QSocially optimal = 1800 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. 1) Using the line drawing tool, illustrate the private marginal cost curve. Label this curve as 'MC'. 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

The demand for cigarettes is given by P = 500 -0.2Q. Cigarettes are manufactured at a constant marginal cost of 50 and sold in a competitive market. What is the quantity of cigarettes sold in equilibrium? Qprivate = 2250 If cigarettes generate a marginal external cost of MEC = 0.05Q, what is the socially optimal level of cigarettes? QSocially optimal = 1800 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. 1) Using the line drawing tool, illustrate the private marginal cost curve. Label this curve as 'MC'. 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

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
See similar textbooks
icon
Related questions
Question
Hand written solutions are strictly prohibited
The demand for cigarettes is given by P = 500 -0.2Q. Cigarettes are manufactured at a constant marginal cost of 50 and sold in a competitive market. What is the quantity of cigarettes sold in equilibrium? Qprivate = 2250 If cigarettes generate a marginal external cost of MEC = 0.05Q, what is the socially optimal level of cigarettes? QSocially optimal = 1800 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. 1) Using the line drawing tool, illustrate the private marginal cost curve. Label this curve as 'MC'. 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) 3) Using the point drawing tool, illustrate the point that represents the profit-maximizing price and quantity. Label this point as 'A'. 4) Using the point drawing tool, illustrate the point that represents the socially optimal price and quantity. Label this point as 'B'. 5) Using the triangle drawing tool, illustrate the social welfare cost of the externality. Label this area as 'Welfare Cost'. Carefully follow the instructions above and only draw the required objects. 600- 550- 500- 450- 400- 350- 300- 250- 200- 150- 100- 50- 0- 0 Price 400 800 Figure 1 D TTTTT 1200 1600 2000 2400 2800 Output Q 선
Transcribed Image Text:The demand for cigarettes is given by P = 500 -0.2Q. Cigarettes are manufactured at a constant marginal cost of 50 and sold in a competitive market. What is the quantity of cigarettes sold in equilibrium? Qprivate = 2250 If cigarettes generate a marginal external cost of MEC = 0.05Q, what is the socially optimal level of cigarettes? QSocially optimal = 1800 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. 1) Using the line drawing tool, illustrate the private marginal cost curve. Label this curve as 'MC'. 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) 3) Using the point drawing tool, illustrate the point that represents the profit-maximizing price and quantity. Label this point as 'A'. 4) Using the point drawing tool, illustrate the point that represents the socially optimal price and quantity. Label this point as 'B'. 5) Using the triangle drawing tool, illustrate the social welfare cost of the externality. Label this area as 'Welfare Cost'. Carefully follow the instructions above and only draw the required objects. 600- 550- 500- 450- 400- 350- 300- 250- 200- 150- 100- 50- 0- 0 Price 400 800 Figure 1 D TTTTT 1200 1600 2000 2400 2800 Output Q 선
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 5 steps with 11 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Externality
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS