Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 16, Problem 1.9P
To determine
What happens when the government imposes a per-unit tax on the firm amounting equal to the marginal damage cost.
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A firm has a division that produces chemical Y, whose average total costs are ATC = 50 + 2Q (where Q is the quantity of Y), and a marketing division that adds its own average total costs of ATC = 20 + 3Q. There is no external market price of Y.
What should be the transfer price?
Suppose that a chemical manufacturing plant is releasing nitrogen oxides into the air, and these emissions are associated with health and ecological damages. Economists have estimated the following marginal costs and benefits for the chemical market, where Q is monthly output in thousands of pounds and P is price per pound. MSB = 50 – 0.4Q; MSC = 2 + 0.4Q; MEB = 0; MEC = 0.2Q. Find the dollar value of a product charge that would achieve an efficient solution.
Supply curves for the production of oil
private+social costs is shown. Answer the following questions based on the diagram.
Sanaton are shown in the diagram below. Supply based on both private and
Price
Supply (Private + Social)
Supply (Private)
(15500,$120)
(21500,$107)
Demand
Quantity
Chapter 16 Solutions
Principles of Economics (12th Edition)
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- Question #2. Assume that an administered water district faces a marginal benefit curve for water represented by the linear function P= MB = -0.5Q + 1200 where Q is the quantity of water in acre-feet. Assume the district’s total cost function is Q2 + 200Q. What is the economically efficient level and price of water use? What would be the revenue of the district under a marginal cost pricing scheme? What would be the revenue of the district under an average cost pricing scheme? What would be the total cost of water under the average cost pricing scheme? Given your answers to 5a through 5d—what is the profit or loss of the water district under each pricing scheme? Why would a water district choose to price water based on average costs? What is consumer surplus under each pricing scheme? What is producer surplus under each pricing scheme? Describe two other water pricing approaches and their potential impact on water consumption. In a brief essay explain the difference between…arrow_forwardMB = 50 - 2A MC = A Draw a graph for conducting a benefit cost analysis using marginal analysis. Solve for the efficient level of abatement and calculate the net benefits. Solve for the deadweight loss present at A = 10.arrow_forwardImagine a firm with a marginal abatement cost (MAC) function equal to: MAC = 25 - 5E. The government introduces a cap-and-trade policy and grandfathers the firm 2 permits initially. Assuming the market price of permits is $5, the firm will spend a total of $___ in order to buy permits.arrow_forward
- how do we answer such questions?arrow_forwardMarket demand for Mandrake roots is given by Q=425-2P and marketsupply is given by Q=5P. The government of Sodden needs money, so it imposes a per unit tax of $5 on mandrake root. How much tax revenue do they raise with this tax?arrow_forward2. In Almond country, farmers are experimenting with new genetically modified 'franken-bees' that are highly effectively at pollinating their nut trees. However, the bees also produce a corrosive form of honey that can damage the paint on cars. Biologists and transportation experts at UC Davis have estimated that each franken-bee hive creates an additional $50 worth of damage to local vehicles. Currently 200 franken-bee hives have been introduced into Almond country. Local motorists have demanded action to curb the franken-bee blight. They have demanded that farmers begin to remove them from the environment. The marginal cost of abatement is uncertain. Anti-bee groups claim costs will be low and estimate it will follow the function MC = -100+ QA, where Q₁ is the amount of abatement. Local farming groups argue that abatement will be much more costly than that and claim abatement costs will be MC = Q. You lead the agency responsible for regulating the bees. Local government officials…arrow_forward
- The market for plasticans is perfectly competitive. Market Supply is given by Q=5P and Market Demand is given by Q=462-2P. Each extra unit of plastican produced imposes a negative externality of $6. What is the (absolute value of) Deadweight Loss due to the externality? Enter a number only, drop the $ sign. Do NOT include a negative sign.arrow_forwardIs it possible to also get the graph for this problem?arrow_forwardThe question is in the screenshots attached. It's part of some practice questions in my online textbook.arrow_forward
- A Price Ceilling of $35 has been set by the Football ruling body for all games and is shown on the chart below. 44] 42- Ticket Price 40- 38- 36- 32- 30- 28- 26- 24- 22- 4200 7000 5600 Number of Tickets Sold 8400 With this price control in effect: What would be the market price?$ 37.00 What would be the number of tickets exchanged (Refer to Table 1)? 5040.00arrow_forwardThe supply curve for the production of oil in Boonton is shown in the diagram below. Supply based on both private/internal and private/internal+social costs is shown. Answer the following questions based on the diagram. Price (28000,$45) Supply (Private + Social) Supply (Private) (37500,$30) Demand Quantityarrow_forwardPlease think of one example of a product that you use on a regular basis for which some of the cost of production or consumption are externalized. Please explain. What will be the long-term cost for or impact on society of this externalization? How much more would you be willing to pay for that product in order to have all costs factored into the price?arrow_forward
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