ilsConsider the market for electric cars. Suppose that a electric car manufacturing facility dumps Slouge inexternality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $420. Thefollowing graph shows the demand (private value) curve and the supply (private cost) curve for electric cars.Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $420 per unit.14001250PRICE (Dollars per unit of electric cars)11209608407001604202001400D1OO3QUANTITY (Units of electric cars)0Supply(Private Cost)Demand(Private Value)Social CostThe market equilibrium quantity isunits of electric cars, but the socially optimal quantity of electric car production is unitsTo create an incentive for the firm to produce the socially optimal quantity of electric cars, the government could impose aper unit of electric cars.

External costs (also called externalities) imply the economic concept of uncompensated social or…

Answered: Consider the market for electric cars.…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 11 - 2E_1 MAC_2 = 8.5 - E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = .5E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a per unit subsidy to abatement equal to $____. Answer:
Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 24 - 2E_1 MAC_2 = 20 - E_2, and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg = E_1 + E_2) is: MED = 2E_Agg. To achieve the socially efficient level of aggregate emissions (E*_Agg), the government institutes a cap and trade policy and sets the cap equal to the socially efficient level of emissions (E*_Agg). If firm 2 is initially grandfathered 5 permits, it will buy more permits. (Note: your answer can be positive or negative; if it is positive, the firm is buying additional permits; if it is negative, the firm sells permits. So, for example, an answer of -10 implies that the firm sells 10 permits)
3. The effect of negative externalities on the optimal quantity of consumption Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $600. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $600 per unit. PRICE (Dollars per unit of electric cars) 2000 1800 1600 1400 1200 1000 800 600 400 200 0 0 + 1 O □ ☐ O 2 3 4 5 QUANTITY (Units of electric cars) The market equilibrium quantity is ☐ Supply (Private Cost) 6 Demand (Private Value) 7 Social Cost (?) units of electric cars, but the socially optimal quantity of electric car production is To create an incentive for the firm to produce the socially optimal…
Describe a situation where you experienced a positive or negative externality or free-riding by you or someone else. Why are these situations problematic?
What externality is carbon pricing trying to address? Explain why this is an externality. What roll does government have in addressing externalities
None
Describe how government actions can lead to more efficient outcomes when negative and positive externalities are present.
For the following alternatives, argue which is true, false or uncertain according to the following statement:"If a certain activity that is not regulated produces a negative externality in production, then it can be inferred that":(a) the equilibrium price is higher than the socially optimal price.(b) the equilibrium quantity is greater than the socially optimal quantity(c) the supply of the activity is less than the socially optimal supply(d) it is necessary to subsidise the activity
Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1 = 12-2E_1 MAC_2=9-E_2, and assume marginal external damages (MED) from aggregate emissions from the two firms (E_Agg) is: MED = E_Agg. Total external damages at the socially efficient level of aggregate emissions is Answer: 1
it is microeconomics If a firm does not pay for an external cost, who does? Why might there be a deadweight loss in a positive externality situation, when the amount bought and sold in the market is below the market optimal equilibrium amount? Why might private firms not want to produce certain types of goods? Start a New Thread
2) Suppose the demand curve for a rubber-based product is Q_D=225-0.5P, and the supply curve is Q_S=0.5P-15. If the external cost of the suit from the waste produced by the factory producing the item is MEC-Q, calculate: (a) Competitive price and quantity when there is no control over the waste disposal of the factory. (b) Price and quantity at the socially optimal level.
QUESTION 16 Consider the following figure Price SMC PMC P. M H. Demand + Quantity Refer to the graph above. What area(s) represent(s) the victim's suffering if pollution permits (given for free to the firms) are implemented to fix the externality?

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