Consider a competitive market in which the PM = 180 - 2q and the SMC = q. In this market, however, there is a positive consumption externality of $60 per unit consumed. What is the DWL that results in market equilibrium?

Consider a competitive market in which the PM = 180 - 2q and the SMC = q. In this market, however, there is a positive consumption externality of $60 per unit consumed. What is the DWL that results in market equilibrium?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter2: Fundamental Economic Concepts

Section: Chapter Questions

Problem 1E: For each of the determinants of demand in Equation 2.1, identify an example illustrating the effect...

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Concept explainers

Market Surplus and Shortage Analysis

In everyday language, a “surplus” indicates that there is an excess of something, while a “shortage” means that there is a scarcity of it. In economics, “market surplus” refers to the condition where the quantity of a certain good more available than what is required or “demanded” by the market. In the same way, a “market shortage” refers to the condition where the quantity of a certain good is less available than what is “demanded” by the market. If quantity in demand is written as Qd and quantity that is supplied is written as Qs, then, the condition Qs > Qd indicates market surplus and condition Qd > Qs indicates market shortage.

Question

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Consider a competitive market in which the PMB
= 180 - 2q and the SMC = q. In this market,
however, there is a positive consumption
externality of $60 per unit consumed. What is
the DWL that results in market equilibrium?

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