This graph shows the market and social supply curves and the demand curve for the market for oil. The market for oilproduces externalities in the form of pollution and environmental damage. The variables in the graph have the followingvalues:A = $69, B = $38, C = 9, D = 33.PriceA00Social CostC DMarket CostDemandQuantity What Quantity of oil would we expect the market to produce?9What is the socially desirable output of oil?33barrels24barrelsTo what magnitude is the market failure for oil?barrels

The entire expenses related to the manufacturing and consumption of an item or service are depicted…

Answered: What Quantity of oil would we expect…

What Quantity of oil would we expect the market to produce? 9 What is the socially desirable output of oil? 33 barrels 24 barrels To what magnitude is the market failure for oil? barrels

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

This graph shows the market and social supply curves and the demand curve for the market for oil. The market for oil
produces externalities in the form of pollution and environmental damage. The variables in the graph have the following
values:
A = $69, B = $38, C = 9, D = 33.
Price
A
00
Social Cost
C D
Market Cost
Demand
Quantity

What Quantity of oil would we expect the market to produce?
9
What is the socially desirable output of oil?
33
barrels
24
barrels
To what magnitude is the market failure for oil?
barrels

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Step 1: Define social cost and marginal cost curves

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Step 2: Compute the output level that would be expected of the market to produce

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Step 3: Compute the socially desirable output

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Step 4: Compute the magnitude of market failure

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