Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 18.4, Problem 1ST
To determine
Calculate socially optimal or efficient outcome.
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What are the estimated abatement cost curves? What would the pollution standard be if they achieved the social optimum? What about an optimal pollution tax?
Price per gallon
Quantity demanded (gallons)
Quantity supplied (gallons)
1
700
300
2
600
400
3
500
500
4
400
600
5
300
700
6
200
800
7
100
900
8
0
1000
The market equilibrium quantity in the market for automobile antifreeze is ______ .
If the external costs per gallon of antifreeze is $2, the socially optimal quantity of antifreeze is _________ .
If producers do not consider the negative externalities associated with carbon emissions, then the market price of their goods will be optimal price and the quantity of their goods will be. quantity. than the than the optimal a. higher, lower. b. lower, higher. c. lower, lower. d. higher, higher. None of the above answers is correct. е.
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- From an economic viewpoint, the optimal amount of pollution a. is zero because all pollution imposes costs on society. b. is that amount firms create when they maximize economic profits by setting their marginal private costs equal to market price. c. is that amount where the marginal social costs of producing a good precisely equals the price of the good. d. Both answers b. and c. are correct.arrow_forwardIs zero pollution possible under a marketable permits system? Why or why not?arrow_forwardIn the table above, the socially optimal level of production would be a. 8 units. b. 4 units. c. 5 units. d. 7 units. e. 6 units.arrow_forward
- the policy mentioned in the article was a carbon tax placed on high-emission vehicles. does the per-unit tax size of P3-P1 on buyers, internalise the externality?arrow_forwardThe marginal social cost (MSC) of an electricity generating plant that uses coal is estimated by a consulting firm to be MSC=3Q, where Q is the output. The consulting firm also provides an estimate of the supply schedule. The marginal private cost (MPC) is estimated to be MPC=Q. The demand is estimated to be P=60-2Q. Given these estimates, what is the impact of the externality? How large is the over- or underproduction? What is the socially optimal price? Is there over- or under-pricing?arrow_forwardThe marginal social cost (MSC) of an electricity generating plant that uses coal is estimated by a consulting firm to be MSC=3Q, where Q is the output. The consulting firm also provides an estimate of the supply schedule. The marginal private cost (MPC) is estimated to be MPC=Q. The demand is estimated to be P=60-2Q. Given these estimates, what is the impact of the externality? How large is the over- or underproduction? What is the socially optimal price? Is there over- or under-pricing? Discuss different methods to correct the externality and the advantages and disadvantages of these methods. Explain. In which sense is the Coase Theorem useful in helping to deal with negative externalities? State and explain the Coase Theorem.arrow_forward
- Refer to the diagram. With MB1 and MC1, society's optimal amount of pollution abatement is Multiple Choice Q1. Q2. Q3. Q4.arrow_forwardA company that spends a huge amount of money to treat their waste and reduce a negative impact to the society ______. a. Decreases their external costs b. Increases their internal costs c. Causes no change d. Decreases their internal costsarrow_forward
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