Suppose the external marginal cost of producing steel is 2Q while the internal marginal cost is 9Q. The inverse demand for steel is P = 120 – Q, what is the socially efficient level of output? Assume that the firm is part of a purely competitive industry A. optimal output is 10 B. optimal output is 9 C. optimal output is 8 D. optimal output is 7 E. no correct answer
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- Consider a competitive equilibrium with positive production externalities. In this econ- omy output will, (a) be equal to its Pareto optimal value. (b) exceed its Pareto optimal value. (c) be below its Pareto optimal value. (d) be where MRS.c = M RTL.c.Suppose Firm A is the anly producer in some market. You are given information about the market demand and marginal cost for Firm As product Firm A's market demand is given by: Q= 60 - P Firm A's marginal cost is given by: MC = 6+Q A) Calculate the profit-maximizing output for Firm A. B) Calculate the profit-maximizing price for Firm A. Calculate what would have been the socially efficient output level produced in this market.The market for plasticans is perfectly competitive. Market Supply is givenby Q=8P and Market Demand is given by Q=417-3P. Each extra unit ofplastican produced imposes a negative externality of $7. What is theefficient quantity? Efficient quantity is determined by setting Marginal Social Costs(=Marg. Pvt. Cost + Marg. External Cost.) equal to Marg. SocialCost=MWTP which is captured by the Demand curve.
- ABC limited faces Marginal cost function given by MC=0.2Q and it faces a perfectly competitive price of shs. 40 for its output. Calculate the ABC competitive output level Given that ABC is exerting a negative externality and its socil marginal cost of production is estimated to be MC= 0.4Q, if the market price remai the same at shs. 40. Calculate the socially optmal level of production for ABC if the government imposes an excersice tax to bring about optimal level of production, calculate the level of tax to be imposed and total tax revenue the government is expected to rised) What are the firm's fixed and variable costs? e) What would be the socially optimal Q* and P* (round to 1 decimal place if needed)?Lecture: Externality - Pigou8. All-Leather is a tanning company located on Lake Michigan in Chicago. Its total cost functionis C(QA) = 125 + 8QA + 5QA2, where QA is leather production per week in thousands of pounds.a) If leather sells for $408 per thousand pounds, how much leather will All-Leather produce?How much profit does All-leather earn?Enjoy is a beverage company located on Lake Michigan near All-Leather in Chicago. Enjoy’sproduction of beverages is negatively affected by water pollution from All-Leather’s productionof leather. Enjoy’s total cost function to produce beverages isC(QE) = 10QE +3QE2 + 3QA2where QE is Enjoy’s weekly production of beverages, in thousandsof gallons and, as above, QA is All-Leather’s weekly production of leather.b) Is this an example of a pecuniary externality or a real externality? Explain.c) What is the extra cost to Enjoy from an additional thousand tons of leather production by AllLeather (i.e., the external marginal cost of an extra unit of QA…
- The market for plasticans is perfectly competitive. Market Supply is givenby Q=4P and Market Demand is given by Q=368-2P. Each extra unit ofplastican produced creates a positive externality of $5. What is theefficient quantity? Efficient quantity is determined by setting Marginal Social Costs(=Marg. Pvt. Cost + Marg. External Cost.) equal to Marg. SocialCost=MWTP which is captured by the Demand curveA utility company is closely monitoring a new set of federal guidelines recently passed by the EPA (Environmental Protection Agency) regarding allowable green house (CO2) emission levels. In this example, the primary external factor of concern for the utility company in question. environment is the A Technological Regulatory (also political and legal) C Competitive D EconomicA steel producing firm has a demand function given as P = 30-Q. the cost function facing the firm is giiven as C = 200 + Q2 .the firm emit its waste into the river and the cost function C = 20 +2.5Q2 Calculate; Market competition equilibrium price and quantity Socially Efficient equilibrium price and quantity Amount of corrective (pigovian) tax permit
- Only typed answer You are an industry analyst that specializes in an industry where the market inverse demand is P = 100 - 3Q. The external marginal cost of producing the product is MCExternal = 6Q, and the internal cost is MCInternal = 14Q. Instruction: Round your answers to the nearest two decimal places. a. What is the socially efficient level of output? units b. Given these costs and market demand, how much output would a competitive industry produce? units c. Given these costs and market demand, how much output would a monopolist produce? units d. Which of the following are actions the government could take to induce firms in this industry to produce the socially efficient level of output. Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit. Pollution taxes…What is the average profit per boat when there are 10 boats in the fishery? Suppose there are no regulation or cooperation at the Fishery, what will be the Open-Access equilibrium number of boats? What is the Socially Optimal equilibrium number of boats for this fishery?Problem 5 refers to the following setup: The demand curve in a market is Q = 6-P. Firm A and B are the only sellers, their marginal costs are constant at 2 and 3 respectively, and there is no fixed cost. They produce identical goods. 5. a) What is the socially efficient outcome? (Specify the quantity for each firm.) b) Find the quantity produced by each firm and the price under Cournot competition. c) What is each firm's profit under Cournot competition?
