Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $105 per ton. PRICE (Dollars per ton of paper) 700 630 560 400 420 280 210 140 70 0 0 O 1 2 O 3 O The market equilibrium quantity is O QUANTITY (Tons of paper) Supply (Private Cost) Demand (Private Value) Social Cost tons of paper, but the socially optimal quantity of paper production is To create an incentive for the firm to produce the socially optimal quantity of paper, the government could impose a tons. of s per ton
Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $105 per ton. PRICE (Dollars per ton of paper) 700 630 560 400 420 280 210 140 70 0 0 O 1 2 O 3 O The market equilibrium quantity is O QUANTITY (Tons of paper) Supply (Private Cost) Demand (Private Value) Social Cost tons of paper, but the socially optimal quantity of paper production is To create an incentive for the firm to produce the socially optimal quantity of paper, the government could impose a tons. of s per ton
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
3. The effect of negative externalities on the optimal quantity of consumption
Consider the market for paper. Suppose that a paper factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additional ton of paper imposes a constant external cost of $105 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for paper.
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Transcribed Image Text:Homework (Ch 10)
Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $105 per ton.
PRICE (Dollars per ton of paper)
700
630
560
490
420
350
280
210
140
70
0
0
O
0
1
O
O
2
O
3
4
5
QUANTITY (Tons of paper)
O
The market equilibrium quantity is
☐
0 Supply
(Private Cost)
Demand
(Private Value)
Social Cost
tons of paper, but the socially optimal quantity of paper production is
To create an incentive for the firm to produce the socially optimal quantity of paper, the government could impose a
tons.
▶
of $
per ton
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