Reconsider the common resource problem given in Example 18.7. Suppose that crawfish popularity continues to increase, and that the demand curve shifts from C = 0.401 – 0.0064F to C = 0.5-0.0064F, where F is the catch of crawfish in millions of pounds and C is the cost in dollars per pound. In addition, you are given the marginal social cost equation C = - 5.645 + 0.6509F, and the marginal private cost equation C = - 0.357 +0.0573F. How does this shift in demand affect the actual crawfish catch, the efficient catch, and the social cost of common access? The actual crawfish catch is 13.45 million pounds of crawfish. (Enter your answer rounded to two decimal places.) The efficient catch is 9.35 million pounds of crawfish. (Enter your answer rournded to two decimal places.) The social cost of common access is $: (Enter your answer rounded to two decimal places.)

Reconsider the common resource problem given in Example 18.7. Suppose that crawfish popularity continues to increase, and that the demand curve shifts from C = 0.401 – 0.0064F to C = 0.5-0.0064F, where F is the catch of crawfish in millions of pounds and C is the cost in dollars per pound. In addition, you are given the marginal social cost equation C = - 5.645 + 0.6509F, and the marginal private cost equation C = - 0.357 +0.0573F. How does this shift in demand affect the actual crawfish catch, the efficient catch, and the social cost of common access? The actual crawfish catch is 13.45 million pounds of crawfish. (Enter your answer rounded to two decimal places.) The efficient catch is 9.35 million pounds of crawfish. (Enter your answer rournded to two decimal places.) The social cost of common access is $: (Enter your answer rounded to two decimal places.)

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter14: Environmental Economics

Section: Chapter Questions

Problem 11SQ

See similar textbooks

Similar questions

(Optimal Provision of Public Goods) Using at least two individual consumers, show how the market demand curve is derived from individual demand curves (a) for a private good and (b) for a public good. Once you have derived the market demand curve in each case, introduce a market supply curve and then show the optimal level of production.
The perfectly competitive profit-maximizing firm in Exhibit 6 creates water and air pollution as a consequence of producing its output of pigs. If pollution costs are borne by third parties, the firm will maximize economic profit by choosing to a. voluntarily incur costs to reduce its pollution. b. produce at output rate Q3. c. produce at output rate Q2. d. produce at output rate Q4. EXHIBIT 6 Private and Social Cost
Consider the market for trees in a public park. These trees are a public good that give benefits to multiple groups of people, as described below. Each Marginal Willingness to Pay curve represents the aggregation of all the individuals in that group, and those groups make decisions collectively. Additionally, the cost of planting trees is given. Consider Q to be the number of trees in the park. Note that no one is ever worse off from additional trees. Arborists: MWTP = 2000 – 5Q Total WTP = 2000Q - 2.5Q2 Environmentalists: MWTP = 1500 – 10Q Total WTP = 1500Q – 5Q2 Casual Park Visitors: MWTP = 800 – 10Q Total WTP = 800Q – 5Q2 Park Haters: MWTP = 500 – 50Q Total WTP = 500Q – 25Q2 MC = 1400 Total Cost = 1400Q (a) If the government does not intervene into the market, how many trees will be planted? (b) What is the socially…
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.
Consider regions A and B. In region A, the marginal benefit associated with pollution cleanup is MB = 300 – 10Q, while in region B, the marginal benefit associated with pollution cleanup is MB = 200 – 4Q. Suppose that the marginal cost of cleanup is constant at $12 per What is the optimal level of pollution cleanup in each of the two regions?
Following are the marginal abatement costs of three firms . Suppose each firm is currently emitting 10 tons / week , so the total emissions are 30 tons / week . Suppose we wish to reduce total emissions by 50 % , to 15 tons per week . The following table provides marginal abatement costs for each firm . a ) What is the total cost if each firm cuts total emission by 50 % from their current levels . b ) What is the total cost if the total emissions decrease by 50 % ( to 15 tons per week ) that meets the equi - marginal principle . c ) From the society's point , which method of reducing ( a or b above ) emissions is better ? Provide a reason .
In a cap-and-trade program that covers only two firms, suppose Firm A has linear marginal abatement costs that are twice as high as Firm B’s linear marginal abatement costs. Permits are handed out so that both firms need to reduce their emissions to meet their cap. With the initial allocation of permits, Firm A and Firm B are each required to do half of the total required abatement. Given this starting point: a.) Neither firm will be seeking to buy permits, because the initial allocation happens to be the least-cost allocation of abatement responsibility. b.) Firm A will be seeking to buy permits and Firm B will be willing to sell some. c.) Firm B will be seeking to buy permits and Firm A will be willing to sell some. d.)Both firms will be seeking to sell permits.
The 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?
The population of Outbacktown is 1,000 people. Each of them has a marginal benefit curve for fireworks given by：MB = 10 − 2Q dollars, where Q is the number of minutes of the fireworks display. The marginal cost is constant, each extra minute costs 5,000 dollars; thus MC = 5,000. Outbacktown is sparsely populated, and the terrain is very flat, so it is fairly safe to assume that fireworks over there are both nonrival and nonexcludable. Obtain the optimal number of minutes that the show should last. What is the Lindahl price for each individual Now suppose that the usual provider is unavailable to offer the firework display this year and the major has to go with a new provider, Mr. Smoke. Fortunately, Mr. Smoke’s marginal cost is the same as the usual provider. However, the environmental quality of Mr. Smoke’s display is not that great; it generates a negative externality in the health of the population that has been estimated to be 2 dollars per each minute of 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.
Suppose the marginal cost of a pure public good increases as more is purchased by a community. Prove that the Lindahl equilibrium will result in a budget surplus at the efficient annual output of the pure public good
Consider a two-firm model with a negative production externality. Let xi denote firm i’s output, with i = 1, 2. Suppose that two firms operate in two different competitive markets and each firm sells its product in its respective competitive market, at the prices p1 = 100 and p2 = 150, respectively, and that they face the same direct production cost ci (xi ) = xi2 /2. Let e(x1 , x2 ) = x1 x2 be the external cost on firm 2’s activity generated by the production of firm 1. Find each firm’s best response function to the output set by the other firm and compute the Nash equilibrium assuming that firms choose their output non-cooperatively and independently. Illustrate the equilibrium in an appropriate graph. Calculate each firm’s equilibrium profits and the total external cost imposed on firm 2. c. Rational choice theory assumes that economic agents are rational and self-interested. Based on the evidence from behavioural laboratory experiments (e.g., dictator games),…