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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Side 19
A mine owner faces the following marginal cost (MC) function: MC= 100 +15*X
Where X is tons of the mineral extracted
The mining of the mineral has external costs. The marginal external cost (MEC) has the following function: MEC = 5*X
Where X is the tons of the mineral extracted.
The (marginal) price curve (PC) has the following function:
PC= 600 -5*X
Where X is tons of the mineral the bought
What is the optimal extraction level in tons?
Vælg én svarmulighed
O 15
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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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- MB = 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_forwardhow do we answer such questions?arrow_forward
- Market 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_forwardThe 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_forward
- The question is in the screenshots attached. It's part of some practice questions in my online textbook.arrow_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
- How do taxes influence the efficiency of resource use? How much does it cost for the government to raise an additional dollar (or $1 billion) of tax revenue?arrow_forwardThe local environmental authority levied an emissions fee of $30 per ton of waste on a firm that has the marginal cost of abatement (MCA) curve displayed in the figure below. What level of emissions will the firm release? How much will it pay in emissions fees?arrow_forwardImagine a firm with a marginal abatement cost (MAC) function equal to: MAC = 32 - 4E. The government offers a $8 per-unit subsidy for abatement. In principle, the firm could ignore the subsidy and continue to emit as many emissions as it was in the absence of government intervention, but there is money to be made from cutting back its emissions. Compared to ignoring the subsidy, how much money could a cost-minimizing firm save or make by cutting back its emissions? (Hint: remember that firms trade off the benefits of the subsidy with the costs of abatement when deciding how much to abate) Answer:arrow_forward
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