Note:-Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure. The market equilibrium quantity istons of bolts, but the socially optimal quantity of bolt production istons.To create an incentive for the firm to produce the socially optimal quantity of bolts, the government could impose aof bolts.per ton 3. The effect of negative externalities on the optimal quantity of consumptionConsider the market for bolts. Suppose that a hardware factory dumps toxic waste into a nearby river, creating a negative externality for those livingdownstream from the factory, Producing an additional ton of bolts imposes a constant marginal external cost (MEC) of $140 per ton. The followinggraph shows the demand (marginal private benefits, or MPB) curve and the supply (marginal private costs, or MPC) curve for bolts.Use the purple points (diamond symbol) to plot the marginal social costs (MSC) curve when the marginal external cost is $140 per ton.PRICE (Dollars per ton of bolts)700630660400350250210140700012O35QUANTITY (Tons of bolts)Supply(MPC)Demand(MPB)MSC

Externalities occur when there is an indirect impact on a party that is not directly related to the…

The market equilibrium quantity is tons of bolts, but the socially optimal quantity of bolt production is tons. To create an incentive for the firm to produce the socially optimal quantity of bolts, the government could impose a of bolts. per tor

The market equilibrium quantity is tons of bolts, but the socially optimal quantity of bolt production is tons. To create an incentive for the firm to produce the socially optimal quantity of bolts, the government could impose a of bolts. per tor

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter17: Externalities And The Environment

Section: Chapter Questions

Problem 2.3P: (Negative Externalities) Suppose you wish to reduce a negative externality by imposing a tax on the...

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Question

Note:-

Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.

The market equilibrium quantity is
tons of bolts, but the socially optimal quantity of bolt production is
tons.
To create an incentive for the firm to produce the socially optimal quantity of bolts, the government could impose a
of bolts.
per ton

3. The effect of negative externalities on the optimal quantity of consumption
Consider the market for bolts. Suppose that a hardware factory dumps toxic waste into a nearby river, creating a negative externality for those living
downstream from the factory, Producing an additional ton of bolts imposes a constant marginal external cost (MEC) of $140 per ton. The following
graph shows the demand (marginal private benefits, or MPB) curve and the supply (marginal private costs, or MPC) curve for bolts.
Use the purple points (diamond symbol) to plot the marginal social costs (MSC) curve when the marginal external cost is $140 per ton.
PRICE (Dollars per ton of bolts)
700
630
660
400
350
250
210
140
70
0
0
1
2
O
3
5
QUANTITY (Tons of bolts)
Supply
(MPC)
Demand
(MPB)
MSC

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Step 1: Define externality.

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Step 2: Draw MSC in the graph.

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Step 3: Calculate the equilibrium level.

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