The effect of external costs on the efficient level Consider the market for steel. Suppose that a steel manufacturing plant dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the plant. Producing an additional ton of steel imposes a constant external cost of 5330 per ton. The foliowing graph shows the demand (private value) curve and the supply (private cost) curve for steel. PRICE (Dollars pbou44033022011000B1O2D3QUANTITY2.5لیا3.544.5The market equilibrium quantity is 555.5Osteel)6supply(Private Cost)Demand(Private Value)tons of steel, but the socially optimal quantity of steel production is 3.5 tons. HomeworkPRICE (Dollars per ton of steel)110099088077066055044033022011000OO0O0OLU345QUANTITY (Tons of steel)06Supply(Private Cost)Demand(Private Value)Social Cost?

Private expenses are the costs confronting individual chiefs in light of genuine market costs.…

Answered: The effect of external costs on the…

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 effect of external costs on the efficient level Consider the market for steel. Suppose that a steel manufacturing plant dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the plant. Producing an additional ton of steel imposes a constant external cost of 5330 per ton. The foliowing graph shows the demand (private value) curve and the supply (private cost) curve for steel.

PRICE (Dollars p
bou
440
330
220
110
0
0
B
1
O
2
D
3
QUANTITY
2.5
لیا
3.5
4
4.5
The market equilibrium quantity is 5
5
5.5
O
steel)
6
supply
(Private Cost)
Demand
(Private Value)
tons of steel, but the socially optimal quantity of steel production is 3.5 tons.

Homework
PRICE (Dollars per ton of steel)
1100
990
880
770
660
550
440
330
220
110
0
0
O
O
0
O
0
O
L
U
3
4
5
QUANTITY (Tons of steel)
0
6
Supply
(Private Cost)
Demand
(Private Value)
Social Cost
?

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