P = 16-.25Q MC 2+.25Q Production creates an external benefit equal to $2 per unit. What price and quantity maximize profit in this market? O28, $10 28, $9 O 24, $9 O 24, $10
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- The figure below shows the demand curve for a U.S. farmer for irrigating his land. It costs $100 per acre to irrigate the land. Each acre of land irrigation generates salty runoff that winds up in the Colorado River. It costs $50 to desalinate this river water so Mexican farmers can irrigate their crops. Price ($) 275 250 225 200 175 150 125 100 75 50 25 0 DMBMB sed 10 20 30 40 50 60 70 80 90 100110120 Irrigation (acres) Tools (2) MCpvt MC social210 " 40 " What kind of externality is present in this market? O a. A negative consumption externality of x-10. Ob. A positive consumption externality of x = 20. Oc. A positive consumption externality of x = 10. Od. A negative consumption externality of x-20. #1 • Supply(P-40+Q₂) 10 " Demand (P-200-Q Social Marginal Benefit P-20-9. 200 9 210 Q Suppose the government imposas a policy (tax or subsidy) such that the new Supply curve lies on the Social Marginal Cost curve. What area represents the government revenue or expenditure from this policy? Ⓒa.DIGH Ob. E-H ⒸI+G+D+E+H+K Ⓒd.E+HIKRefer to the figure below. Producer surplus is: 18 16 14 12 10 8 642 O $420 O $60 O $180 O 120 O $12 S₁ D₁ 5 10 15 20 25 30 35 40 45
- Mr permise states I do not understand why anyone would suggest the use of taxes or regulations in pollution problems. Taxes are unfair and regulations are costly and inefficient. The best approach is to trust the market. Firms will control their emissons because it is cost effective for them to do so. The only policy they may need to applied is the use of market permits. Thismarket would function completely and permit prices would clearly represent all revlevant costs Discuss this statement26 Price 24 22 20 18 16 Supply 14 12 10 8 6 4 2+ Demand Social Value HI 2 4 6 8 10 12 14 16 18 20 22 Quantity How large would the subsidy need to be to internalize the externality? Less than $2 ○ $2 O More than $2 O The size of the subsidy cannot be determined from the figure.0 Figure 4 PRICE (Dollars per unit) 9.00 8.40 6.21 4.50 Social Cost Supply 48 60 76 100 QUANTITY (Units of tobacco) O $6.21 and 76 units, respectively. O $9.00 and 60 units, respectively. O $8.40 and 48 units, respectively. O $4.50 and 100 units, respectively. Demand Refer to Figure 4. This graph represents the tobacco industry. The socially optimal price and quantity are
- 4) A new vaccine against deadly disease has just been discovered. Presently, 55 people die from the disease each year. The new vaccine will save lives, but it is not completely safe. Some recipients of the shots will die from adverse reactions. The projected effects of the inoculation are given in the accompanying table: % of population Total deaths Total deaths Marginal benefit of Marginal cost of inoculation inoculated due to disease due to inoculation inoculation 55 10 45 20 36 30 28 3 40 21 6. 50 15 10 60 10 15 70 20 80 3 25 90 30 100 35 Calculate MB and MC of inoculation. What proportion of the population should optimally be inoculated?P 25 20 15 10 5 d1 Q 0 0 3 6 9 1215182124 COUNTRY 1 O(c) $31.5 (d) $40.5 O(e) $45 s1 S1 IP INTERNATIONAL MARKET 25 20 15 10 5 P 23. What is the welfare gain to consumers (increase in consumer's surplus) resulting from trade in country 2? O(a) $3 O(b) $27 S2 S1 IP D2 0 0 3 6 9 1215182124Q D1 P 25 216 20 15 COUNTRY 2 s2 IP 10 5 0- 0 3 6 9 1215182124Q d2Refer to Figure 11-1. If the external cost of producing the good is not taken into account, what is the deadweight loss in the market? Figure 11-1. Price O O 8 7 5 0 $2 $4 $5 $10 $15 8 10 15 17 O C2 C1 Quantity
- Q 1.4 Which one of the following is a condition for a market to exist? (a) A potential buyer and a potential seller.(b) A buyer must have the means to purchase.(c) The agreement must be guaranteed by law or by tradition.(d) All of the above are correct.Q.1.5 How can the impact of a decrease in the price of petrol on the demand curve forpetrol be illustrated?(a) The demand curve for petrol will shift to the left.(b) The demand curve for petrol will shift to the right.(c) The downward movement along the demand curve for petrol.(d) The demand curve will become more elastic.If the sanction (punishment) is 4 years, what is the total social cost of jailing criminals (number of arrested for the crime times the cost of jail)? 6m 160K O 240K 12m O 10mRefer to the above supply and demand graph of Product X. Q, Quantity of Product X What would happen if the government taxed the producers of this product because it has negative externalities in production? O 1) Supply would increase. 2) Demand would decrease. O 3) Price would decrease. 4) Supply would decrease. Price