The market is currently in equilibrium at Point E. Suppose this product has a negativeexternality. If government decides to tax the sellers to internalize the negativeexternality, the new equilibrium will be at PointPriceCEBB515253D₂D₁Quantity

Market Equilibrium:In a free market, the equilibrium price and quantity are determined where the…

Answered: The market is currently in equilibrium…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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7. Failing to correct negative externalities will create a deadweight loss. Graph it! 8. Explain how the government can discourage negative externalities. Graph it!
Consider placing a tax on a good that has a positive benefit externality of MEB=3 where MSC=2Q and MPB = 21-Q. a. Compare the equilibrium outputs with (i) no tax, (ii) with a Tax of $3, and (iii) at the social optimu. b. In this case, what happens to DWL when a tax is added? Show and explain your reasoning.
The market for plasticans is perfectly competitive. Market Supply is givenby Q=3P and Market Demand is given by Q=469-3P. Each extra unit ofplastican produced imposes a negative externality of $9. What is the totalsurplus at the market quantity?
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21 24 P 500 300 250 50 50 M DE J F CH 91 ABG K S MSB D 50 80 90 100 Q Which of the following would lead to the allocatively efficient outcome? A subsidy A price floor of $250 A quota of 90 units A tax
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Setup Suppse that the Demand and Supply for Electricity is given below. The production of electricity has a negative externality. Demand: QD= 9.875 -0.125P Supply: QS= 4P -19 Inverse Demand: P=79-8QD Inverse Supply: P=4.75+0.25QS Marginal Spillover Cost: MSPC= 9.5 +Q 1) Determine the Efficient Quantity. 2) Calculate the Deadweight Loss from Externality. 3) Calculate Optimal Pigovian Per Unit Tax 4) Calculate Tax Revenues Market Price: $7.00 Market Quantity: 9
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Due to a firm generating external costs (a negative externality), the government decides to ________ the firm. In response, the firm will produce ________ units of output in order to continue maximizing profits and reach the new producer equilibrium. Question 4Answer a. tax; fewer b. subsidize; more c. tax; more d. subsidize; fewer
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The market is currently in equilibrium at Point E. Suppose this product has a negative externality. If government decides to tax the sellers to internalize the negative externality, the new equilibrium will be at Point Price C E B B 5152 53 D₂ D₁ Quantity