ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Suppose demand is QD=9−P and supply is QS=P. There is a constant positive externality of $4 per unit (marginal external benefit, MEB = $4). Find the
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- Suppose supply is P= ―3 + (2/5)Qs and demand is P= 51 ― (1/10)Qd. Further, suppose that each unit carries a negative externality that costs someone in society $4. What is the socially optimal quantity, and how much would buyers need to pay and producers need to receive to achieve that outcome?arrow_forwardThe government wants to address the pollution associated with the production of a good by introducing a tax on negative externality. The government is unsure about the magnitude of the negative externality (social cost of pollution) and hence it is considering two options: a high tax and a low tax option. Which statement(s) is/are true? Mark all that applies. Group of answer choices The government’s tax revenue will be higher under the high tax option. The government’s tax revenue may not be higher under the high tax options. The consumption level of the good may be lower under the high tax option. Regardless of whether the high tax or the low tax option is introduced, the cost of the tax is still lower than the social cost of pollution. Both high tax and low tax options are cost-effective in achieving a given level of pollution reduction as long as the same tax applies to all polluting sources. Only the high tax option is cost-effective.arrow_forwardShow work..arrow_forward
- The restaurant industry develops an exciting new technology, a robot that quickly prepares food in half the usual time of chefs. This increases supply (producers save costs on labor) and demand (consumers find it fun to watch the robot make a meal) such that the price remains constant. However, the robot runs on coal and produces a lot of pollution, generating an external cost on production. How do consumer and producer surplus change as a result of this new technology? Choice 1 of 4:Consumer surplus increases but the change in producer surplus is indeterminateChoice 2 of 4:Producer surplus increases but the change in consumer surplus is indeterminateChoice 3 of 4:Both producer and consumer surplus increaseChoice 4 of 4:Both producer and consumer surplus decreasearrow_forwardThe price of good X is $7. But each unit of good X produces has an external cost of $1. What is the social cost of one unit of good X?arrow_forwardThe market for pens in Howards is perfectly competitive with no externalities. Market demand is given by Q=165-P. Market Supply is given by Q=P-16.What is total Surplus in this market?arrow_forward
- According to marginal analysis, in a market that experiences a positive externality, the market (private) players would ________________________ to the socially optimal output level. A. over-produce an output level relative B. under-produce an output level relative C. exactly produce an output level equalarrow_forwardWhich of the following is an example of a negative externality (additional social cost)? Multiple Choice ___ an increase in the value of land you own when a nearby development is completed ___ the costs paid by a company to build an automated factory ___ falling property values in a neighborhood where a disreputable nightclub is operating ___ the higher price you pay when you buy a heavily advertised product.arrow_forwardNeed details solutionsarrow_forward
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