EBK ECON MICRO
6th Edition
ISBN: 9781337671828
Author: MCEACHERN
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 3, Problem 12P
To determine
The reasons as to why markets should not determine the amount of goods produced that imposes a negative externality
Introduction:
Negative Externality: It is a
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19. (20 points in total) Suppose that the market demand curve is p = 80 - 8Qd, where p is the price per
unit and Qd is the number of units demanded per week, and the market supply curve is p = 5+7Qs,
where Q5 is the quantity supplied per week.
a.
b.
C.
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e.
Calculate the equilibrium price and quantity for a competitive market in which there is
no market failure.
Draw a diagram that includes the demand and supply curves, the values of the vertical-
axis intercepts, and the competitive equilibrium quantity and price. Label the curves, axes and
areas.
Calculate both the marginal willingness to pay and the total willingness to pay for the
equilibrium quantity.
Calculate both the marginal cost of the equilibrium quantity and variable cost of
producing the equilibrium quantity.
Calculate the total surplus. How is the value of total surplus related to your calculations
in parts c and d?
Please answer all parts of the question
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