2. Problems and Applications Q3 Greater availability of alcohol leads to more motor vehicle accidents and, thus, imposes costs on people who do not drink and drive. The following graph shows the market for alcohol. Determine whether the private and social values are equal in this case. If they are not, shift the demand curve in the appropriate direction to reflect this difference. Then determine whether the private and social costs are equal in this case. Again, if they are not, shift the supply curve to reflect this difference. Supply Demand Supply QMarket Demand Qoptimum Deadweight Loss Quantity of Alcohol Use the black point (plus symbol) to indicate the market equilibrium level of output. Then use the grey point (star symbol) to indicate the efficient level of output in this case. At the market equilibrium, the social cost of alcohol consumption is than the social value, resulting in a deadweight loss. Use the black triangle (plus symbols) to shade the area representing deadweight loss. Price of Alcohol +-

2. Problems and Applications Q3 Greater availability of alcohol leads to more motor vehicle accidents and, thus, imposes costs on people who do not drink and drive. The following graph shows the market for alcohol. Determine whether the private and social values are equal in this case. If they are not, shift the demand curve in the appropriate direction to reflect this difference. Then determine whether the private and social costs are equal in this case. Again, if they are not, shift the supply curve to reflect this difference. Supply Demand Supply QMarket Demand Qoptimum Deadweight Loss Quantity of Alcohol Use the black point (plus symbol) to indicate the market equilibrium level of output. Then use the grey point (star symbol) to indicate the efficient level of output in this case. At the market equilibrium, the social cost of alcohol consumption is than the social value, resulting in a deadweight loss. Use the black triangle (plus symbols) to shade the area representing deadweight loss. Price of Alcohol +-

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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E8
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