The diagram to the right depicts the market for cough medicine in a small town. The quantity of cough medicine is measured in bottles sold per week; price is measured in dollars. The townspeople are happier and healthier because people who have colds and flus buy and take the medicine and reduce the spread of infection. Note that demand curve D, represents the marginal private benefit of cough medicine, market equilibrium occurs at (20, $14), the cost of the $28T $24 N INI externality per bottle is $3, and the socially optimal equilibrium occurs at (24, $15). What is the deadweight loss due to the externality? $20 N The value of the deadweight loss due to the externality is $ $16-$15 (Round to the nearest dollar as needed.) $14 $12-T $8 $4- $0+ 10 30 40 50

The diagram to the right depicts the market for cough medicine in a small town. The quantity of cough medicine is measured in bottles sold per week; price is measured in dollars. The townspeople are happier and healthier because people who have colds and flus buy and take the medicine and reduce the spread of infection. Note that demand curve D, represents the marginal private benefit of cough medicine, market equilibrium occurs at (20, $14), the cost of the $28T $24 N INI externality per bottle is $3, and the socially optimal equilibrium occurs at (24, $15). What is the deadweight loss due to the externality? $20 N The value of the deadweight loss due to the externality is $ $16-$15 (Round to the nearest dollar as needed.) $14 $12-T $8 $4- $0+ 10 30 40 50

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 40P: Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in...

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