Economics For Today
Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Chapter 14, Problem 2SQP
To determine

Price under pollution restrictions.

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Production of Commodity X creates 10 pounds of emissions for every unit of X produced. The demand and supply curves for X are described by the following table: What is the equilibrium price and quantity, and how much pollution will be emitted?
Air horns impose many external costs on society: the risk of being deafened, the annoyance of being awakened in the middle of the night, and so on. Therefore, the market equilibrium quantity of air horns is not equal to the socially optimal quantity. The following graph shows the demand for air horns (their private value), the supply of air horns (the private cost of producing them), and the social cost of air horns, including both the private cost and external costs. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.
Efficiency in the presence of externalities Air horns impose many external costs on society: the risk of being deafened, the annoyance of being awakened in the middle of the night, and so on. Therefore, the market equilibrium quantity of air horns is not equal to the socially optimal quantity. The following graph shows the demand for air horns (their private value), the supply of air horns (the private cost of producing them), and the social cost of air horns, including both the private cost and external costs. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.
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