2. The following data show how the marginal external benefit and marginal private benefit associated with a soil treatment agent to control Japanese beetles vary GALLONS PER YEAR (IN MILLIONS) 20 30 40 50 MPB ($) 30 25 20 15 MEB ($) 10 6 2 0 with the gallons of the control agent sold per year. Draw the demand curve for the control agent and show how the marginal private benefit differs from the marginal social benefit. Suppose the supply of the agent is infinitely elastic at the current price of $25 per gallon. Will the market equilibrium be efficient? How would your answer differ if the market supply were infinitely elastic at a price of $15 per gallon? What policies could you suggest to achieve efficiency?

2. The following data show how the marginal external benefit and marginal private benefit associated with a soil treatment agent to control Japanese beetles vary GALLONS PER YEAR (IN MILLIONS) 20 30 40 50 MPB ($) 30 25 20 15 MEB ($) 10 6 2 0 with the gallons of the control agent sold per year. Draw the demand curve for the control agent and show how the marginal private benefit differs from the marginal social benefit. Suppose the supply of the agent is infinitely elastic at the current price of $25 per gallon. Will the market equilibrium be efficient? How would your answer differ if the market supply were infinitely elastic at a price of $15 per gallon? What policies could you suggest to achieve efficiency?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter13: Positive Externalities And Public Goods

Section: Chapter Questions

Problem 24P: Assume that the marginal private costs of a film producing fuel-efficient can; is greater than the...

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