Suppose that we are considering the market for electric cars The private demand for cars is given buy: ? = 160 − 2? And the private supply of electric cars is given by: ? = ? − 20 Suppose also that electric cars produce a positive externality, with a Marginal Economic Benefit of $20 per unit. 1. What would be the private market equilibrium (p* & Q*)? 2. What is the socially optimal equilibrium (p* & Q*)?
Suppose that we are considering the market for electric cars The private demand for cars is given buy: ? = 160 − 2? And the private supply of electric cars is given by: ? = ? − 20 Suppose also that electric cars produce a positive externality, with a Marginal Economic Benefit of $20 per unit. 1. What would be the private market equilibrium (p* & Q*)? 2. What is the socially optimal equilibrium (p* & Q*)?
Chapter19: Externalities And Public Goods
Section: Chapter Questions
Problem 19.7P
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Question
Suppose that we are considering the market for electric cars The private demand for cars is
given buy:
? = 160 − 2?
And the private supply of electric cars is given by:
? = ? − 20
Suppose also that electric cars produce a positive externality, with a Marginal Economic Benefit of
$20 per unit.
1. What would be the private
2. What is the socially optimal equilibrium (p* & Q*)?
3. What is
4. What is the increase in Total Surplus from moving from the private market equilibrium
to the socially optimal equilibrium?
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