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units of pharmaceuticals, but the socially optimal quantity of pH To create an incentive for the firm to produce the socially optimal quantity of pharmaceuticals, the government could impose a The market equilibrium quantity is

units of pharmaceuticals, but the socially optimal quantity of pH To create an incentive for the firm to produce the socially optimal quantity of pharmaceuticals, the government could impose a The market equilibrium quantity is

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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3. The effect of negative externalities on the optimal quantity of consumption Consider the market for pharmaceuticals. Suppose that a pharmaceutical factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing additional pharmaceuticals imposes a constant per-unit external cost of $420. The following graph shows the demand (private value) curve and the supply (private cost) curve for pharmaceuticals. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $420 per unit. 1200 1000 Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $420 per unit. PRICE (Dollars per unit of pharmaceuticals) 1200 1080 960 840 720 600 480 360 240 120 O O U O 0 Supply (Private Cost) Demand (Private Value) Social Cost D
Transcribed Image Text:3. The effect of negative externalities on the optimal quantity of consumption Consider the market for pharmaceuticals. Suppose that a pharmaceutical factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing additional pharmaceuticals imposes a constant per-unit external cost of $420. The following graph shows the demand (private value) curve and the supply (private cost) curve for pharmaceuticals. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $420 per unit. 1200 1000 Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $420 per unit. PRICE (Dollars per unit of pharmaceuticals) 1200 1080 960 840 720 600 480 360 240 120 O O U O 0 Supply (Private Cost) Demand (Private Value) Social Cost D
The market equilibrium quantity is units of pharmaceuticals, but the socially optimal quantity of pharmaceuticals production is To create an incentive for the firm to produce the socially optimal quantity of pharmaceuticals, the government could impose a per unit of pharmaceuticals. units.
Transcribed Image Text:The market equilibrium quantity is units of pharmaceuticals, but the socially optimal quantity of pharmaceuticals production is To create an incentive for the firm to produce the socially optimal quantity of pharmaceuticals, the government could impose a per unit of pharmaceuticals. units.
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