14. Suppose that the market for a certain good has an inverse demand of P = 200 – Q. The aggregate private marginal cost for the firms that produce the good is MC = 20 + Q. However, production of the good also creates pollution with a external marginal cost of EMC = 10 + 2Q. e. If this is a perfectly competitive market with no regulation, what is the equilibrium price and quantity produced? f. Suppose instead that the market is a monopoly. Calculate the profit- maximizing price and quantity. g. Determine the socially efficient price and quantity for the good. h. Calculate the socially optimal per-unit tax to levy on the competitive firms and the monopolist respectively to make them produce at the socially efficient level.

14. Suppose that the market for a certain good has an inverse demand of P = 200 – Q. The aggregate private marginal cost for the firms that produce the good is MC = 20 + Q. However, production of the good also creates pollution with a external marginal cost of EMC = 10 + 2Q. e. If this is a perfectly competitive market with no regulation, what is the equilibrium price and quantity produced? f. Suppose instead that the market is a monopoly. Calculate the profit- maximizing price and quantity. g. Determine the socially efficient price and quantity for the good. h. Calculate the socially optimal per-unit tax to levy on the competitive firms and the monopolist respectively to make them produce at the socially efficient level.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.9P

See similar textbooks

Similar questions

Suppose that the market for a certain good has an inverse demand of P = 200 − Q.The aggregate private marginal cost for the firms that produce the good is MC = 20 + Q.However, production of the good also creates pollution with an external marginal cost ofEMC = 10 + Q/2.a) If this is a perfectly competitive market with no regulation, what is theequilibrium price and quantity produced?b) Suppose instead that the market is a monopoly. Calculate the profit-maximizingprice and quantity.c) Determine the socially efficient price and quantity for the good.d) Calculate the socially optimal Pigouvian tax to levy on the competitive firms tomake them produce at the socially efficient level.
#6. If government regulation forces firms in an industry to internalize a negative externality, then we can expect the equilibrium price of the good to and the equilibrium quantity to a. increase; increase b. increase; decrease c. decrease; decrease d. decrease; increase e. increase; remain unchanged
2. A perfectly competitive market exists for almonds. Demand for almonds is Q= 200 – P where P is the price of almonds and Q is the total quantity of almonds. The private total Q? The production of almonds cost for the unregulated market is C 50 + 80Q + Q² First, solve for the 2 creates an externality where the total external cost is E = Pigouvian tax (per unit of output of almonds) that results in the social optimum. Suppose that one company, MegaAlmonds, becomes a monopolist in the production of almonds. What is the optimal tax that should be placed on the almonds in this case?
2. Suppose that marginal cost, and thus market supply, for the industry is given by P=2Qs + 4. The market demand curve is QD = 28-1/4P. A. Determine the equilibrium price and quantity in a competitive market. B. Determine the quantity the monopolist will produce and the price it will charge. C. Suppose that the marginal external cost is $3. Determine the quantity the monopolist will produce and the price it will charge.
#8. If government regulation forces firms in an industry to internalize the externality, then we can expect the equilibrium price of the good to ________ and the equilibrium quantity to ________. a. increase; increase b. increase; decrease c. decrease; decrease d. decrease; increase e. increase; remain unchanged
Which of these is a negative production externality? An airline manufacturer must hold up production of a plane at great cost due to delays in its global supply chain. A cereal manufacturer suffers losses due to a drought and unexpected increases in market prices of grains that it uses in its cereals. O Consumers complain to the wrong regulators about price gouging in gasoline markets. A producer of lead for batteries that are used nationwide emits noxious gases in its factory town and local people are getting sick. Thch Save
You are an industry analyst who specializes in an industry where the market inverse demand is P = 200 − 4Q. The external marginal cost of producing the product is MCExternal = 6Q, and the internal cost is MCInternal = 12Q. a. What is the socially efficient level of output? b. Given these costs and market demand, how much output would a competitive industry produce? c. Given these costs and market demand, how much output would a monopolist produce? d. Discuss actions the government might take to induce firms in this industry to produce the socially efficient level of output.
3) A chemical company can produce Q units of a chemical H, with marginal costs of MC = 9 + Q. and can distribute the chemical at marketing marginal costs of MC = 1. The demand for His given by P = 30-1.5Q. If an external market exists where H can be bought or sold without marketing expenses for $13, how much H should the firm produce? 00 units 4 units 05 units 07 units 10 units
42. Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. Qs, 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? P Qd Qs1 Qs2 $20 10 8 $18 1. 9 7 $15 2.5 7.5 5.5 $12 4 6 4 $10 5 3 $5 7.5 2.5 0.5 Table 12.12
The table below shows current carbon emissions and the cost of reducing carbon emissions for three industrial firms. The government introduces a cap-and-trade policy to regulate carbon emissions. The total cap on emissions is 180 tonnes of carbon, and each firm receives an initial allocation of tradable permits for 60 tonnes of carbon emissions. Current carbon emissions Firm A B C (tonnes) 80 100 70 a. Firm A will buy 40 emission ✓ Firm C. Cost of reducing emissions by 1 ton ($) 150 200 50 Firm B will sell 20 emissior Firm C. Instructions: Round your answer to the nearest whole number. b. To break even, the selling firm must receive $ 150
2) The following table shows how the marginal benefit of a service varies for five consumers. 田 Quantity 1 4 Samuel 150 125 100 75 Adam 125 100 75 50 Bronn 100 75 50 25 Michael 200 150 125 125 Matt 600 400 200 150 a) Derive the demand curve for this service assuming that it is a public good. b) If marginal cost of the good is 850, what is the efficient output of the public good? c) If marginal cost of the good is 425, what is the efficient output of the public good? d) If marginal cost of the good is &850, what is the efficient output assuming it is private good?
The figure below shows the marginal benefit (demand) of polluting for two firms: Alpha and Beta. Before the introduction of a pollution tax, pollution is free, that is, MC = $0 per ton of emissions. Marginal Benefit (MB) to Firm Tax = $100 0 MB BETA MBALPHA 25 50 75 100 Emissions (tons) The government decides to impose a tax on pollution of $100 per ton of emissions. That is, the per-unit the tax is the marginal cost of polluting. Which of the follow are true? (Select all that are true.) a. As a result of the tax, the total emissions will decrease by 50 units b. The tax was intended to decrease production by 50 units for each firm. c. As a result of the tax, both firms will decrease emissions by the same amount d. After the tax is imposed, Firm Beta will emit 50 tons more pollution than Firm Alpha e. Before the tax is imposed, Firm Beta emitted more pollution than Firm Alpha f. As a result of the tax, total emissions from the two firms will be cut in half g. The amount of tax collected…