When negative externality exists, the firms loose profits. Calculate the size of the firms’ loss. On the other hand, the community’s gain from the social efficient allocation level. Interpret the results. Suppose that the private marginal cost for a product's (rice) consumption isgiven by the MB curve (or MB = 360 – 4Q) and the private marginal costassociated with its production is given by the MPC curve (or MC = 6Q). Thediagram is presented below.P ($)360MPC320+280+240-216200+160-120+80-40+MB102030405060708090Q per year

Given information MB=360-4Q MC=6Q Negative externality exists. Given diagram

Answered: Suppose that the private marginal cost…

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 4E

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When negative externality exists, the firms loose profits. Calculate the size of the firms’ loss. On the other hand, the community’s gain from the social efficient allocation level. Interpret the results.

Suppose that the private marginal cost for a product's (rice) consumption is
given by the MB curve (or MB = 360 – 4Q) and the private marginal cost
associated with its production is given by the MPC curve (or MC = 6Q). The
diagram is presented below.
P ($)
360
MPC
320+
280+
240-
216
200+
160-
120+
80-
40+
MB
10
20
30
40
50
60
70
80
90
Q per year

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