Note the equations, taxes and use all the equations and numbers as given in the question. The market for a particular chemical, called Negext is described by the following equations: Qd = 100 –5P Qs =5P a. Find the equilibrium price and quantity. Compute consumer surplus and producer surplus a the market equilibrium. b. For each unit of Negext produced, 5 units of pollution are emitted, and each unit of pollutio imposes a cost on society of $1. Compute the total cost of pollution when the market is in equilibrium. c. Suppose that the government restricts emissions to 100 units of pollution. Graph the market under this constraint. Find the new equilibrium price and quantity and show them on your graph. d. Suppose that instead of restricting pollution, the government imposes a tax on producers equal to $5 for each unit of chemical produced. Calculate the new equilibrium price and quantity and the cost of pollution. e. Which of the two policies would you recommend? Why?

Note the equations, taxes and use all the equations and numbers as given in the question. The market for a particular chemical, called Negext is described by the following equations: Qd = 100 –5P Qs =5P a. Find the equilibrium price and quantity. Compute consumer surplus and producer surplus a the market equilibrium. b. For each unit of Negext produced, 5 units of pollution are emitted, and each unit of pollutio imposes a cost on society of $1. Compute the total cost of pollution when the market is in equilibrium. c. Suppose that the government restricts emissions to 100 units of pollution. Graph the market under this constraint. Find the new equilibrium price and quantity and show them on your graph. d. Suppose that instead of restricting pollution, the government imposes a tax on producers equal to $5 for each unit of chemical produced. Calculate the new equilibrium price and quantity and the cost of pollution. e. Which of the two policies would you recommend? Why?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 3PA: Greater consumption of alcohol leads to more motor vehicle accidents and, thus, imposes costs on...

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