The supply and demand of sugar are given as Qs = 5P, Qd = 250- P where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar. Assuming that sugar is sold in a competitive market, a) What is the market price? How many tons of paper will be produced per year at that price? b) What is the efficient output of paper? c) What is the amount of total Pigouvian tax to achieve efficiency? d) What is the amount of total Pigouvian subsidy to achieve efficiency?
The supply and demand of sugar are given as Qs = 5P, Qd = 250- P where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar. Assuming that sugar is sold in a competitive market, a) What is the market price? How many tons of paper will be produced per year at that price? b) What is the efficient output of paper? c) What is the amount of total Pigouvian tax to achieve efficiency? d) What is the amount of total Pigouvian subsidy to achieve efficiency?
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter12: Environmental Protection And Negative Externalities
Section: Chapter Questions
Problem 42P: Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the...
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3) The supply and demand of sugar are given as
Qs = 5P, Qd = 250- P
where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar. Assuming that sugar is sold in a competitive market,
a) What is the market price? How many tons of paper will be produced per year at that price?
b) What is the efficient output of paper?
c) What is the amount of total Pigouvian tax to achieve efficiency?
d) What is the amount of total Pigouvian subsidy to achieve efficiency?
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