As the case of the refined petroleum market, MBp=90-0.3Q, MCp=30+0.1Q, marginal profit=60-0.4Q, marginal external cost=0.2Q. Solve for the competitive market equilibrium and efficient outcomes (i.e. what’s Qm and Pm? What’s Q* and P*?). Qm= Pm= Q*= P*=
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As the case of the refined petroleum market, MBp=90-0.3Q, MCp=30+0.1Q, marginal profit=60-0.4Q, marginal external cost=0.2Q. Solve for the competitive
Qm=
Pm=
Q*=
P*=
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- From an economic viewpoint, the optimal amount of pollution a. is zero because all pollution imposes costs on society. b. is that amount firms create when they maximize economic profits by setting their marginal private costs equal to market price. c. is that amount where the marginal social costs of producing a good precisely equals the price of the good. d. Both answers b. and c. are correct.Which is the correct answer? To be a Pareto-efficient, a competitive market in long-run equilibrium needs: a. Marginal external costs are = 0 b. Marginal private costs are above marginal social costs. c. Marginal private costs are below marginal social costs.Which of the following is NOT a possible way of solving an externality problem of electricity production using coal? A. A quota of electricity production using coal exactly equal to the production level in the socially optimal allocation. B. A ban on coal burning, in order to force the use of alternative energy sources. C. Issue trading rights to burn coal for electricity production, and let a market decide the clearing price for those rights. D. A per-unit tax on the electricity price equal to marginal external cost of burning coal at the socially efficient allocation.
- A chemical company can produce Q units of a chemical H, with marginal costs of MC = 9 + Q, and can distribute the chemical at marketing marginal costs of MC = 1. The demand for H is given by P = 30 - 1.5Q. If an external market exists where H can be bought or sold without marketing expenses for $13, how much H should the firm produce? 4 units 10 units 7 units 5 units 0 unitsGiven the following information: Initially, a perfectly competitive market for a product is in equilibrium, with an upward-sloping straight-line market supply curve, a downward-sloping straight-line market demand curve, and a market price of $30 per unit. Consumption of this product causes pollution. Initially, the marginal external cost of the pollution caused by consuming the product is $9 per unit. There is no government policy toward the externality. The government then mandates a shift to a new product version, and all firms adopt and produce the latest version. Consumers view the new product version as equally as good as the initial product version. Consumption of the new version of the product causes less pollution, and the marginal external cost decreases by $3 per unit. For each firm, production of the new product version does not change fixed cost, but it does increase average variable cost by $3 per unit. If necessary, the market adjusts to a new equilibrium. There is…A competitive refining industry releases one unit of waste into the atmosphere for each unit of refined product. The inverse demand function for the refined product is pd = 20 q, which represents the marginal benefit curve where q is the quantity consumed when the consumers pay price pd. The inverse supply curve for refining is MPC = 2 + q, which represents the marginal private cost curve when the industry produces q units. The marginal external cost curve is MEC = 0:5q, where MEC is the marginal external cost when the industry releases q units of waste. Marginal social cost is given by MSC = MPC + MEC. a. What are the equilibrium price and quantity for the refined product when there is no correction for the externality? b. How much of the chemical should the market supply at the social optimum? c. How large is the deadweight loss from the externality? d. Suppose that the government imposes an emission fee of T per unit of emissions. How large must the emission fee be if the…
- Suppose the market demand function for newspapers is given by QD=90-3P. In the production of newspaper, several chemicals are released into the atmosphere. The supply function for newspapers is given by QS=2P-30-T, where T represents the external cost created in the production process for newspapers. a. Find the equilibrium price and quantity that would emerge in the private market for newspaper. (HINT: Set T=0) b. An economic consulting firm has determined that the external cost created by the chemicals released during newspaper production is $5 per unit. Find the socially optimal price and quantity of newspapers. (HINT: Set T=5) c. Calculate what the total surplus would be at the private market price and quantity. d. Calculate what the total surplus would be at the socially optimal price and quantity.Market (inverse) demand is given by P = 100 - 2Q = MB where MB is marginal benefit. Market (inverse) supply is given by P = 10 + 0.25Q = MCP where MCP is private marginal cost. Suppose marginal external cost is given by MCE = 0.75Q. The dead weight loss or efficiency loss from the market equilibrium is 0.5x10x______=_______.Please fill out the two blank.Consider Product NE, which has a negative externality associated with its’ production and use ( i.e., the “Incidental Cost” of each unit of Product NE is greater than zero). You are told that : * The “Efficient” Output of Product NE = 100 units * The Free-Market Equilibrium Output of Product NE = 125 units * The Total Surplus ( to society) on Unit Number 50 ( i.e., on that one unit ALONE) is equal to $ 45 * The Cumulative Surplus on the first 100 units produced is equal to $ 6,000 ( i.e., the sum of the surplus( to society) on ALL 100 units adds up to $ 6,000) Is the Consumer’s Surplus + Producer’s Surplus on Unit Number 50 ( i.e., the sum of CS + PS) greater than $ 45, less than $ 45, or exactly equal to $ 45 ( just circle your answer) ? Greater than $ 45 Less Than $ 45 Exactly $ 45 *Draw a graph to…
- If the size of the external costs in an industry increased:A The supply curve including external costs would increaseB The efficient price would increaseC The free market price would increase D Both a and b are trueit is microeconomics If a firm does not pay for an external cost, who does? Why might there be a deadweight loss in a positive externality situation, when the amount bought and sold in the market is below the market optimal equilibrium amount? Why might private firms not want to produce certain types of goods? Start a New ThreadThe marginal social cost (MSC) of an electricity generating plant that uses coal is estimated by a consulting firm to be MSC=3Q, where Q is the output. The consulting firm also provides an estimate of the supply schedule. The marginal private cost (MPC) is estimated to be MPC=Q. The demand is estimated to be P=60-2Q. Given these estimates, what is the impact of the externality? How large is the over- or underproduction? What is the socially optimal price? Is there over- or under-pricing?
