Consider the market for paper. Suppose that a paper factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additional ton of paper imposes a constant external cost of $210 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for paper. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $210 per ton. PRICE (Dollars per ton of paper) 700 630 560 490 420 350 280 210 140 70 0 0 O ☐ O 2 3 O 4 5 QUANTITY (Tons of paper) The market equilibrium quantity is ☐ O ☐ Supply (Private Cost) 6 Demand (Private Value) 7 Social Cost tons of paper, but the socially optimal quantity of paper production is To create an incentive for the firm to produce the socially optimal quantity of paper, the government could impose a of paper. tons. $ per ton

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 $75 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 (MS) curve when the marginal external cost is $75 per ton.

The table below shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. Qs1 is the quantity supplied without social costs. Qs2 is the quantity supplied with social costs. How does accounting for the externality affect the equilibrium price and quantity? Price Qd Qs1 Qs2 $20 0 10 8 $18 1 9 7 $15 2.5 7.5 5.5 $12 4 6 4 $10 5 5 3 $5 7.5 2.5 0.5 What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs. Identify the equilibrium price and quantity if we are able to account for social costs. Does it make sense that accounting for the negative externality results in a higher price? Explain your answer.

Calculate private market equilibrium and the socially optimal equilibrium for the following negative production externality. (note: demand and supply functions are already in the inverse format) Demand: P = 100 - Q Supply: P=-50 + 2Q Marginal External Cost: MEC = 2Q Private Market Equilibrium = Socially Optimal Equilibrium = (enter your responses rounded to a whole number)

Suppose that in greater Sydney, the demand for flowering plants is given by P = 60 - Q, and supply is given by P= 0.2Q, where Q represents thousands of plants. Because people enjoy seeing flowers as they pass by others' houses, these plants produce a positive externality. Suppose that each plant produces a marginal external benefit equal to $6. 1. What will be the market price and the quantity supplied of flowering plants? 2. What is the socially optimal number of plants?

This is an end-of-chapter problem that I'm struggling with! thanks!

In the market for widgets, consumers have a market demand (marginal benefit) curve of P = MB = 250 - Q. In this problem, there is no distinction between private and social marginal benefit. The widget suppliers have a market supply (private marginal cost) curve of P = MC Private = 100+ Q. The production of widgets generates a negative externality in the form of pollution, with marginal external cost of X = 50. Due to this externality, there will be a difference between private and social marginal cost. Questions Analyze the following scenarios describing possible outcomes in the market for widgets. Efficient Outcome Find the equation for social marginal cost (MCsocial), using the information above. Determine the efficient quantity (Q*). AGEC 3503 1 ● HW7 - Negative Externalities Calculate the joint surplus (JS*), total external cost (TX*), and the total surplus (TS*) based on the efficient quantity. Equilibrium Outcome Find the market equilibrium, defined by the market quantity (Q) and…

Air pollution creates a negative externality—a cost suffered by a third party as a result of an economic transaction. A standard solution to a negative externality is a Pigouvian tax, a tax that raises the marginal private cost of pollution emissions to the level of the marginal social cost. The socially optimal quantity of pollution emissions is then determined by the intersection of the marginal private benefit, or demand, curve and the marginal social cost curve. The article notes that "putting a dollar value on the benefits of cleaner air has been difficult." Assuming this problem has been resolved, in the accompanying diagram, move the endpoints of line Smarginal social cost to show the marginal social cost curve. Then move the line labeled "Tax" to show the amount of the tax needed to limit emissions to the socially optimal level.

Parks confer many external benefits on society: open space, trees that reduce pollution, and so on. Therefore, the market equilibrium quantity of parks is not equal to the socially optimal quantity. The following graph shows the demand for parks (their private value), the supply of parks (the private cost of producing them), and the social value of parks, including both the private value and external benefits.   Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.

The Centers for Disease Control and Prevention estimates that every alcoholic drink consumed generates roughly $2 in external economic costs. Briefly describe how you would model this externality in a supply and demand diagram (e.g. would you draw a social marginal cost curve or a social marginal benefit curve?).