The private marginal benefit associated with a product's consumption is PM B = 350 – 4Q and the private marginal cost associated with its production is PMC = 6Q. Furthermore, the marginal external damage associated with this good's production is MD = 4Q. To correct the externality, the government decides to impose a tax of T per unit sold. What tax T should it set to achieve the social optimum?

The private marginal benefit associated with a product's consumption is PM B = 350 – 4Q and the private marginal cost associated with its production is PMC = 6Q. Furthermore, the marginal external damage associated with this good's production is MD = 4Q. To correct the externality, the government decides to impose a tax of T per unit sold. What tax T should it set to achieve the social optimum?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Can you answer this?
Define what is externality in detail.
?
Consider the positive externality graph If firms are able to ignore the benefit to society, which of the following statements is correct? Price ($) P* P₁ Private 0 Qp Private MSC MSB Dprivate Quantity (in units)
The following question refers to the diagram below, which illustrates the market for a good whose production results in a negative externality. If there is no regulation in place to correct the externality, which area represents MARKET surplus? That is, at the market equilibrium, what area is consumer surplus, plus producer surplus, not considering damage to the environment? Select an answer and submit. a) a. b) a – d. c) a + b. d) a + b + e.
Suppose that a particular market contains a negative externality in consumption, with MSC=MPC. What should a Pigouvian tax be set to, in order to correct the externality?
ayor Grinch imposes a $1 tax on each bottle of Zlurp. Consumption per person is now bottles. This yields a per-person consumer surplus of not including the cost of pollution, a per-person external cost of , and government revenue of per person. Total surplus per person is now as a result of this policy. (Hint: Total surplus is equal to consumer surplus minus the external cost of pollution plus government revenue.) Based on your calculations, you support the mayor's policy because it welfare compared to before the tax.
Which of the following is a good example of a negative externality? A) Tom drives home drunk instead of taking an Uber B) Miguel buys an exercise bike on Facebook Marketplace C) Michelle paints her house, and the neighbors enjoy looking at her freshly painted house D) Jane joins Match.com
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 following is a copy of the information from Question 1: Consider Product NE, which has a negative externality associated with its production and use ( i.e., the “Incidental Cost” ( IC) of each unit of Product NE is greater than zero). You are told that : * The “Efficient” Output of Product NE = 9000 units * The Free-Market Equilibrium Output of Product NE = 10,000 units * The Consumer’s Surplus + Producer’s Surplus on Unit Number 6000 ( i.e., on that one unit ALONE) is equal to $ 70 ( i.e., the sum of CS + PS = $ 70) * The Cumulative Surplus on the first 9000 units produced is equal to $ 175,000 ( i.e., the sum of the surplus( to society) on ALL 9000 units adds up to $ 175,000) Is the Cumulative Surplus on the first 10,000 units ( i.e., ALL 10,000 units together) greater than $ 175,000, less than $ 175,000, or exactly equal to $ 175,000 ? a. Greater Than $…
Don’t know how to finish solving
USE THE GRAPH! There is a negative externality from Lyft rides (TRAFFIC) of $0.60 per mile. If the city still charged a $0.60 tax, what would be the deadweight loss? DWL=