Note:-Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure. 5. The effect of external costs on the efficient levelConsider the market for bolts. Suppose that a hardware factory dumps toxic waste into a nearby river, creating a negative externality for those livingdownstream from the factory. Producing an additional ton of bolts imposes a constant external cost of $210 per ton. The following graph shows thedemand (private value) curve and the supply (private cost) curve for bolts.Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $210 per ton.PRICE (Dollars per ton of bolts)60054048042036030024015012060001nLG35QUANTITY (Tons of bolts)06Supply(Private Cost)Demand(Private Value)Social Cost Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $210 per ton.ⒸPRICE (Dollars per ton of bolts)8 3 3 2 2 2 2 2 26005404804203603002401801206000O12M"5QUANTITY (Tons of bolts)D6Supply(Private Cost)Demand(Private Value)Social CostThe market equilibrium quantity is tons of bolts, but the socially optimal quantity of boit production istons.

Negative externalities or external costs are harmful side effects arise out of production or…

Answered: The market equilibrium quantity is tons…

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The market equilibrium quantity is tons of bolts, but the socially optimal quantity of boit production is tons.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5. The effect of external costs on the efficient level
Consider the market for bolts. Suppose that a hardware factory dumps toxic waste into a nearby river, creating a negative externality for those living
downstream from the factory. Producing an additional ton of bolts imposes a constant external cost of $210 per ton. The following graph shows the
demand (private value) curve and the supply (private cost) curve for bolts.
Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $210 per ton.
PRICE (Dollars per ton of bolts)
600
540
480
420
360
300
240
150
120
60
0
0
1
n
L
G
3
5
QUANTITY (Tons of bolts)
0
6
Supply
(Private Cost)
Demand
(Private Value)
Social Cost

Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $210 per ton.
Ⓒ
PRICE (Dollars per ton of bolts)
8 3 3 2 2 2 2 2 2
600
540
480
420
360
300
240
180
120
60
0
0
O
1
2
M
"
5
QUANTITY (Tons of bolts)
D
6
Supply
(Private Cost)
Demand
(Private Value)
Social Cost
The market equilibrium quantity is tons of bolts, but the socially optimal quantity of boit production is
tons.

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Step 1: Define Negative Externality and Socially Optimal Quantity

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Step 2: Find out Market equilibrium

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