Quantity (1000's of boxes) 1000 2000 The following table shows the Marginal Costs and Marginal Private Benefits associated with different levels of production for pistol ammunition in the US. Marginal Private Cost $14 16 Marginal Private Benefit 26 24 3000 4000 5000 6000 18 20 22 24 22 20 18 16 a.) Given the information above, sketch the market equilibrium.. b.) Suppose that there is an externality associated with the consumption of pistol ammunition such that there is an External Benefit equal to negative 8 dollars per box. On the diagram above. show the resulting Marginal Social Benefit curve and the Socially Optimal Level of output. c.) Suppose that there is a tax imposed on the consumption of ammunition that exactly counter-acts this negative externality. Label the after-tax output and prices levels on the diagram. and calculate the Consumer and Producer burden from this tax. d.) Explain why, unlike in many cases, there will not be a dead-weight loss due to this tax.

Quantity (1000's of boxes) 1000 2000 The following table shows the Marginal Costs and Marginal Private Benefits associated with different levels of production for pistol ammunition in the US. Marginal Private Cost $14 16 Marginal Private Benefit 26 24 3000 4000 5000 6000 18 20 22 24 22 20 18 16 a.) Given the information above, sketch the market equilibrium.. b.) Suppose that there is an externality associated with the consumption of pistol ammunition such that there is an External Benefit equal to negative 8 dollars per box. On the diagram above. show the resulting Marginal Social Benefit curve and the Socially Optimal Level of output. c.) Suppose that there is a tax imposed on the consumption of ammunition that exactly counter-acts this negative externality. Label the after-tax output and prices levels on the diagram. and calculate the Consumer and Producer burden from this tax. d.) Explain why, unlike in many cases, there will not be a dead-weight loss due to this tax.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 40P: Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in...

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