1.) Consider the market for plastic grocery store bags. Suppose that demand for these bags is given by PD = 24 – QD and supply is given by PS = Q$. These bags, after they are used, pile up in the streets and get stuck in trees, creating unattractive litter. This litter imposes a negative externality of $2 per plastic bag. a.) Compute the socially optimal quantity of plastic bags. b.) Compute the competitive equilibrium in the market for plastic bags. Compute consumer surplus, producer surplus, and total surplus in the market for plastic bags in this competitive equilibrium.

1.) Consider the market for plastic grocery store bags. Suppose that demand for these bags is given by PD = 24 – QD and supply is given by PS = Q$. These bags, after they are used, pile up in the streets and get stuck in trees, creating unattractive litter. This litter imposes a negative externality of $2 per plastic bag. a.) Compute the socially optimal quantity of plastic bags. b.) Compute the competitive equilibrium in the market for plastic bags. Compute consumer surplus, producer surplus, and total surplus in the market for plastic bags in this competitive equilibrium.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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