The demand for cigarettes is given by Figure 1 P= 550 - 0.20. Cigarettes are manufactured at a constant marginal cost of 50 and sold in a competitive Price 650- 600 market. 550 What is the quantity of cigarettes sold in equilibrium? 500 450 Qprivate = 2500 400 350 If cigarettes generate a marginal external cost of MEC = 0.050, what is the socially optimal level of cigarettes? 300- 250 Osoially optimal 200 150 100- 50 04 400 1200 1600 2000 2400 2800 3200 800 Output Fo

The demand for cigarettes is given by Figure 1 P= 550 - 0.20. Cigarettes are manufactured at a constant marginal cost of 50 and sold in a competitive Price 650- 600 market. 550 What is the quantity of cigarettes sold in equilibrium? 500 450 Qprivate = 2500 400 350 If cigarettes generate a marginal external cost of MEC = 0.050, what is the socially optimal level of cigarettes? 300- 250 Osoially optimal 200 150 100- 50 04 400 1200 1600 2000 2400 2800 3200 800 Output Fo

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 29CTQ: Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant....

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Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and output. a. Assuming that the production of televisions generates external costs, illustrate the effect of the producers being forced to pay a tax equal to the external costs generated, and indicate the equilibrium output. b. If instead of generating external costs, television production generates external benefits, illustrate the effect of the producers being given a subsidy equal to the external benefits generated, and indicate the equilibrium output.
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Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?
Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost?