I) The figure below shows a market in which there is an externality. The curve S2 is parallel to S1. Areas in the figure are numbered. Price 60.00 49.60 1 40.80 27.60 4 6 19.2 32.4 Quantity s) What type of externality is shown in the figure and why is it a problem in economics? Identify the market equilibrium and the social equilibrium in the figure. If the market were to move from the market equilibrium to the social equilibrium, indicate the area(s) that represent the chan b. C. consumer surplus, the change in producer surplus, the change for third parties, and the net effect on total surplus. Does total surplus ri fall? d. ) What would be the amount of a per-unit tax needed to fix the externality?
I) The figure below shows a market in which there is an externality. The curve S2 is parallel to S1. Areas in the figure are numbered. Price 60.00 49.60 1 40.80 27.60 4 6 19.2 32.4 Quantity s) What type of externality is shown in the figure and why is it a problem in economics? Identify the market equilibrium and the social equilibrium in the figure. If the market were to move from the market equilibrium to the social equilibrium, indicate the area(s) that represent the chan b. C. consumer surplus, the change in producer surplus, the change for third parties, and the net effect on total surplus. Does total surplus ri fall? d. ) What would be the amount of a per-unit tax needed to fix the externality?
Chapter17: Externalities And The Environment
Section: Chapter Questions
Problem 2.4P
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Address the question in the image.
Transcribed Image Text:Il) The figure below shows a market in which there is an externality. The curve S2 is parallel to S1. Areas in the figure are numbered.
Price
60.00
49.60
40.80
2
8
le
27.60
5
19.2
32.4
Quantity
s) What type of externality is shown in the figure and why is it a problem in economics?
Identify the market equilibrium and the social equilibrium in the figure.
If the market were to move from the market equilibrium to the social equilibrium, indicate the area(s) that represent the change in
a.
b.
C.
consumer surplus, the change in producer surplus, the change for third parties, and the net effect on total surplus. Does total surplus rise or
fall?
d.
OWhat would be the amount of a per-unit tax needed to fix the externality?
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