The figure shows the production of fertiliser by a perfectly competitive profit-maximising firm. Production of the good leads to pollution of the environment. This pollutionis an external cost to the firm. MC represents marginal cost as faced by the firm; I and II represent possible positions of the marginal social cost curve.Suppose that the government imposes a 'pollution tax' on the firm at a constantCosts and revenuerate per unit of output. Assuming that this firm is the only polluter in the industry,what effect will the tax have on the market price?- MCMove to £1IIMove to £2Remain at £3Move to £4Move to £5Q1Quantity of fertiliserQ2. Q3

Perfect competition is such a market structure where that are many buyers and many sellers. The good…

The figure shows the production of fertiliser by a perfectly competitive profit-maximising firm. Production of the good leads to pollution of the environment. This pollution is an external cost to the firm. MC represents marginal cost as faced by the firm; I and II represent possible positions of the marginal social cost curve. Costs and revenue Suppose that the government imposes a 'pollution tax' on the firm at a constant rate per unit of output. Assuming that this firm is the only polluter in the industry, what effect will the tax have on the market price? MC O Move to £1 II Move to £2 D Remain at £3 %3D O Move to £4 Move to £5 Q1 Q2 Q3 Quantity of fertiliser

The figure shows the production of fertiliser by a perfectly competitive profit-maximising firm. Production of the good leads to pollution of the environment. This pollution is an external cost to the firm. MC represents marginal cost as faced by the firm; I and II represent possible positions of the marginal social cost curve. Costs and revenue Suppose that the government imposes a 'pollution tax' on the firm at a constant rate per unit of output. Assuming that this firm is the only polluter in the industry, what effect will the tax have on the market price? MC O Move to £1 II Move to £2 D Remain at £3 %3D O Move to £4 Move to £5 Q1 Q2 Q3 Quantity of fertiliser

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter14: Environmental Economics

Section: Chapter Questions

Problem 5SQ: The perfectly competitive profit-maximizing firm in Exhibit 6 creates water and air pollution as a...

See similar textbooks

Similar questions

Economists sometimes shock noneconomists by stating that they do not favor the complete elimination of pollution. Explain the rationale for this position.
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.
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
Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Fe and Qe. On the graph, shade in the deadweight loss at the market output.
Is zero pollution possible under a marketable permits system? Why or why not?