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Explanation of Solution
When a competitive industry sells pollution generating product, the price of the product will be lower and the quantity produced will be larger than the green industry. Externality cost incurred by the negative externality of the product is not included in the price of the product in the competitive industry. This implies that the price charged is lower than the actual cost and a lower price results in a higher quantity demanded of the product. However, the green industry includes the externality cost for pricing, and hence the price charged will be higher.
Externality: Externality is the benefit or cost that affects someone who is not directly involved in the production or consumption of a good or service.
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Chapter 14 Solutions
MICROECONOMICS FOR TODAY (LL)-W/MINDTAP
- The following graph shows the downward-sloping demand curve for Oiram-46, a monopolist producing unique magic hats. The graph also shows Oiram-46's marginal revenue curve and its average total cost curve. On the following graph, use the orange point (square symbol) to indicate the profit-maximizing quantity. Use the blue point (circle symbol) to indicate the profit-maximizing price. Use the purple point (diamond symbol) to indicate the average total cost. Use the tan rectangle (dash symbol) to show Oiram-46's total revenue and the grey rectangle (star symbol) to show its total cost. PRICE (Dollars per magic hat) 2 0 20 Marginal Cost 18 ATC 16 Profit-Maximizing Quantity 14 12 Profit-Maximizing Price MC 8 Demand 02 4 6 8 10 12 14 16 18 20 QUANTITY (Magic hats per week) Based on the graph, Oiram-46's profit is equal to 5 TOTAL SCORE: 1/4 Average Total Cost Total Revenue Total Cost Grade Step 2 (to complete this step and unlock the next step)arrow_forwardExplain information regarding the effective interest rates being charged and how much higher the rent-to-own stores’ cash price exceeded the price of the identical item at a reputable retail outlet.arrow_forwardHow can Rent-to-own industries avoid the restrictions on interest rates? Explain.arrow_forward
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