Consider a case of positive externality generated through the use of alternative energy sources, such as photovoltaic or wind power, in the form of reduced carbon emissions to the atmosphere or simply say reduced air pollution. The demand for alternative energy is given by marginal private benefit curve (MPB) MPB = 40 – Q. The supply of alternative energy is represented by the marginal private cost curve (MPC): MPC = 20 + Q. In both MPB and MPC curves, Q represents the amount of alternative energy demanded or supplied in Kilo-Watt-hours (in thousands). Further, consider that the use of each unit of Q generates $10 external benefits to the society in the form of reduced air pollution. Given the above information: | a) Find the optimal amount of alternative energy and corresponding per unit price without considering the externality benefits of the use of alternative energy sources.

Consider a case of positive externality generated through the use of alternative energy sources, such as photovoltaic or wind power, in the form of reduced carbon emissions to the atmosphere or simply say reduced air pollution. The demand for alternative energy is given by marginal private benefit curve (MPB) MPB = 40 – Q. The supply of alternative energy is represented by the marginal private cost curve (MPC): MPC = 20 + Q. In both MPB and MPC curves, Q represents the amount of alternative energy demanded or supplied in Kilo-Watt-hours (in thousands). Further, consider that the use of each unit of Q generates $10 external benefits to the society in the form of reduced air pollution. Given the above information: | a) Find the optimal amount of alternative energy and corresponding per unit price without considering the externality benefits of the use of alternative energy sources.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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