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Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $350. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $350 per unit. PRICE (Dollars per unit of electric cars) 1000 900 800 700 600 500 400 300 200 100 Supply (Private Cost) Demand: (Private Value) Social Cost

Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $350. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $350 per unit. PRICE (Dollars per unit of electric cars) 1000 900 800 700 600 500 400 300 200 100 Supply (Private Cost) Demand: (Private Value) Social Cost

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter12: Environmental Protection And Negative Externalities
Section: Chapter Questions
Problem 40P: Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in...
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PRICE (Dollars per unit of electric cars) 800 700 600 500 400 300 200 100 0 0 1 O D D O O 3 4 5 QUANTITY (Units of electric cars). Supply (Private Cost) Demand (Private Value) 6 7 Social Cost The market equilibrium quantity is units of electric cars, but the socially optimal quantity of electric car production is To create an incentive for the firm to produce the socially optimal quantity of electric cars, the government could impose a per unit of electric cars.. units.. of
Transcribed Image Text:PRICE (Dollars per unit of electric cars) 800 700 600 500 400 300 200 100 0 0 1 O D D O O 3 4 5 QUANTITY (Units of electric cars). Supply (Private Cost) Demand (Private Value) 6 7 Social Cost The market equilibrium quantity is units of electric cars, but the socially optimal quantity of electric car production is To create an incentive for the firm to produce the socially optimal quantity of electric cars, the government could impose a per unit of electric cars.. units.. of
Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $350. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $350 per unit. ? 1000 PRICE (Dollars per unit of electric cars) ggggg gg gg 700 600 500 400 300 200 100 0 0 O O M a O 3 QUANTITY (Units of electric cars) Supply (Private Cost) Demand (Private Value) Social Cost
Transcribed Image Text:Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $350. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $350 per unit. ? 1000 PRICE (Dollars per unit of electric cars) ggggg gg gg 700 600 500 400 300 200 100 0 0 O O M a O 3 QUANTITY (Units of electric cars) Supply (Private Cost) Demand (Private Value) Social Cost
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