a. How does the amount produced by a free market compare with the socially-optimal level of production? Identify the total private surplus, external costs, and total social surplus both at the level of production that occurs in a free market and at the socially- optimal level of production. What is the deadweight loss of the externality?

a. How does the amount produced by a free market compare with the socially-optimal level of production? Identify the total private surplus, external costs, and total social surplus both at the level of production that occurs in a free market and at the socially- optimal level of production. What is the deadweight loss of the externality?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Explain 'negative externalities,' defined in class as 'hidden costs' making the difference between the 'public market price' and the 'true price' of a product. Illustrate using an example of a product with a negative externality
1. List some of the ways that the problems caused by externalities can be solved without government intervention.
19:36 ! 13:41 3.00 KB/S 015 The market below depicts supply, demand and marginal social cost in the widget market. 0.00 0.00 0.70 0.00 050 0.40 020 50 100 125 150 175 2001 To correct for the externality, what should be used? Oa. A subsidy of $0.20 b. A tax of $0.20 Oc. A subsidy of $0.30 Od. A tax of $0.30 =
3 Let the market supply (representing the marginal private cost) have the form: P(Q) = 1 + 3Q, and the inverse market demand (representing the marginal social benefit) has the form: P(Q) = 25 - Q. Suppose that the production of Q is characterized by a negative externality. The magnitude of the externality (marginal damage) is $4 per unit of Q. a) Find the equilibrium price, quantity, consumer surplus, and the producer surplus resulting from an unregulated market in Q. b) Compute the net economic benefit to society which results from an unregulated market in Q. Note: you need to account for the total damages resulting from an externality. c) What is the socially efficient quantity of Q? d) At the efficient allocation, what is the net benefit to society?
Q3
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?
I would like help with this question. The graph should be the one answered.
Please explain both statements in detail with graphs and examples. "When external benefits exist, maximizing private profits produces less than the social optimum" and "when external costs exist, maximizing private profits produces more than the social optimum".
Which of the following is true? A. the firm produces based on the private marginal benefit and private marginal cost B. the welfare of the society is maximized if the sum of the private and social marginal benefits is equated with the sum of the private and social marginal costs C. there is an overproduction of goods with negative externality or an underproduction of goods with positive externality because the social costs and social benefits are not considered in the production decisions of the firm D. all are true E. none is true
Please draw and upload an externality graph for the "Truck Tire" market in the US. Use the data provided to draw each axis, plot the points and create the following curves: 1) Demand, 2) Supply (private), and 3) Supply (social), Also mark equilibrium on both S (private)and S (social). After you draw the curve, explain it and describe how government can use it to regulate this tire market. Price Quantity Demanded Quantity Supplied (Private) Quantity Supplied (Social) $ 300 $10 million $ 35 million $ 30 million $ 250 $15 million $30 million $25 million $ 200 $20 million $25 million $20 million $150 $25 million $20 million $15 million $ 100 30 million 15 million 10 million
2. Suppose that demand for a product is Q = 1200 - 4P and supply is Q = -240 +2 P. Furthermore, suppose that the marginal external damage of this product is $12 per unit. How many more units of this product will the free market produce than is socially optimal? Calculate the deadweight loss associated with the externality.
The following table shows how the marginal benefit of a service varies for five consumers. Quantity 1 2 3 4 Serkan 150 125 100 75 Asuman 125 100 75 50 Bahar 100 75 50 25 Murat 200 150 125 125 Meriç 600 400 200 150 Derive the demand curve for this service assuming that it is a public good. If marginal cost of the good is 850, what is the efficient output of the public good? If marginal cost of the good is 425, what is the efficient output of the public good? If marginal cost of the good is 850, what is the efficient output assuming it is private good?