The table below shows the supply and demand conditions for a furniture factory that pollutes the air. The third column (Qs1) represents a supply curve without accounting for the social cost of pollution. The fourth column (Qs2) represents the supply curve when the firm is required to account for the social cost of pollution. Price QD Qs1 Qs2 $10 450 400 250 $15 440 440 290 $25 430 480 330 $30 420 520 370 $35 410 560 410 Answer the following: a) What is the negative externality in this situation? b) Identify the equilibrium price and equilibrium quantity when we account only for private costs. c) Identify the equilibrium price and equilibrium quantity when we account for the social costs.

The table below shows the supply and demand conditions for a furniture factory that pollutes the air. The third column (Qs1) represents a supply curve without accounting for the social cost of pollution. The fourth column (Qs2) represents the supply curve when the firm is required to account for the social cost of pollution. Price QD Qs1 Qs2 $10 450 400 250 $15 440 440 290 $25 430 480 330 $30 420 520 370 $35 410 560 410 Answer the following: a) What is the negative externality in this situation? b) Identify the equilibrium price and equilibrium quantity when we account only for private costs. c) Identify the equilibrium price and equilibrium quantity when we account for the social costs.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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