P₁ Pa O 0.5 (P3-P2) (Q0-Q1) O 0.5 (P3-P1) (Q0-Q1) 0.5 (P2-P1) (Q0-Q1) (P3-P1) (Q0-Q1) Q₁0 Social Cost Private Cost Demand Quantity Calculate the Deadweight loss from the negative externality represented in the graph above.
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- Is zero pollution possible under a marketable permits system? Why or why not?Consider an upstream chemical company and a downstream agricultural producer coex- isting along a river. The chemical company produces output y, but, in the process, also generates waste by-product r that is harmful for apple production by the agricultural firm. The marginal benefit and damage functions are: MB(r) MD(r) 12 – I 2.r Determine analytically the level of waste that is generated at (i) individual benefit maxi- mizing level of production, (ii) the socially optimal level of production, and (iii) compare both allocations. Show your results in a figure.PRICE (Dollars per ton) 70 63 56 49 42 35 28 + 21 T 14 7 0 Demand +++ 0 40 80 120 160 200 240 280 320 360 400 QUANTITY (Millions of tons) Graph Input Tool Daily Demand for Pollution Rights Price (Dollars per ton) Quantity Demanded (Millions of tons) 7 360 Suppose the government has determined that the socially optimal quantity of particulate matter is 120 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of $ of particulate matter emitted will achieve the desired level of pollution. ? per ton Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off tradable pollution permits. Each permit entitles its owner to emit one ton of particulate matter per day. To achieve the socially optimal quantity of pollution, the government auctions off 120 million…
- PRICE (Dollars per ton) 80 72 64 56 48 40 32 24 16 B Demand 0 25 50 75 100 125 150 175 200 225 250 QUANTITY (Millions of tons) Graph Input Tool Daily Demand for Pollution Rights Price 8 (Dollars per ton) Quantity Demanded (Millions of tons) 225 Suppose the government has determined that the socially optimal quantity of sulfur dioxide emissions is 125 million tons per day. One way governments can charge firms for pollution rights is by imposing a per-unit tax on emissions. A tax (or price in this case) of $ of sulfur dioxide emitted will achieve the desired level of pollution. per ton Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off pollution permits. Each permit entitles its owner to emit one ton of sulfur dioxide per day. To achieve the socially optimal quantity of pollution, the government auctions off 125 million pollution permits. Given…DNPS9.2(a) The market for dry cleaning is reflected by the demand and supply curves (Q is in thousands): Pa = 5-Q Ps= 2 + 2Q Producing dry cleaning creates ground water pollution with a constant marginal external cost of 1.2. (Hint: Think about this graphically and algebraically like a per-unit tax.) (a) Sketch a Graph that shows the Dsoc, Spriv, Ssoc, Qopt (Societal Perspective) & Deadweight Loss (DWL) in an Unregulated Market?Identify a newspaper article that illustrates a market failure in your assignedCaribbean country. Ensure that you provide a screenshot of the article in your submission. NOTE: Only the following market failures should be examined: public good, asymmetric information, positive or negative externality. (i) Provide a brief summary of the main points in the article. (Maximum 30 words) (ii)Identify the type of market failure being discussed in the article and discuss why market failure occurs in this scenario. (iii) Suggest a relevant government policy that would yield the efficient outcome andcarefully explain the process through which the implementation of the government policy will lead to the optimal outcome. (Maximum 30 words) (iv) How will the imposition of the chosen government policy impact consumer surplus, producer surplus and total surplus in this scenario? (Maximum 30 words)
- B) Qb Qb - Qd Price D) Qa P₁ Pa P₂ Figure above shows a market with a negative externality. The efficient output level is? (A) Qd Po 0 d S₂ = Marginal social cost a e C Qd Qa Q b S₁ = Marginal private cost Demand Quantity(a) Explain what is meant by the term "negative externality" in production(a) A magician recorded his magic show and broadcast it freely in internet. How would you classify the show with reference to rivalrous and excludability? (b) There are two online magic show enthusiasts, A and B in the market. Their demand functions are QA = 5 – 0.25PA and QB = 15 – 0.5PB respectively. Explain the method to obtain the market demand function for magic show which are freely available online. (c) Draw the marginal social benefit curve for online magic show. (d) If a magician produces magic show and broadcast online to both individuals at a constant marginal cost of $20, what is the market equilibrium quantity and price of online magic shows?
- Industrial pollution is often cited as an example of a negative externality, but what about smoking? Most of you grew up in an era when smoking was much less socially acceptable than when your parents and grandparents were young. Both students and instructors used to smoke in the classroom and it was allowed was allowed in many college classrooms as late as the 1970s. Although few, if any, colleges allow smoking in classroom buildings now, many bars and restaurants have smoking sections. (a) would you be willing to pay smokers to not smoke while they are in the same restaurant or (b) would you choose to sit in a restaurant’s smoking section to avoid a longer wait for a table in a nonsmoking section. Discuss the cost of the externality to you and others.(11) Consider a market with private marginal benefit (quantity demanded) given by PMB = 400 – 4Q, social marginal benefit given by SMB = 400 – 2Q and private marginal cost (quantity supplied) given by PMC = 40 + 4Q. Assume PMC = SMC. (a) Graph these PMB, SMB, and PMC curves. (b) What kind of externality is present? (c) Find the equilibrium price and quantity if producers only respond to private mar- ginal costs.The following are examples of externalities except A Air pollution from the factory (B) Noise pollution from construction Low production Pandemic
