The supply and demand of sugar are given as           Qs = 5P,  Qd = 250- P   where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar.  Assuming that sugar is sold in a competitive market,   What is the market price? How many tons of paper will be produced per year at that price? What is the efficient output of paper? What is the amount of total Pigouvian tax to achieve efficiency? What is the amount of total Pigouvian subsidy to achieve efficiency?

1. Suppose that Good X is sold in a perfectly competitive market. The supply curve is given by            P=2Q, where P is the price of X per unit and Q is the quantity supplied. The demand curve is          given by P=470-7Q. Suppose that the production process emits unpleasant smoke to the                neighbourhood. The external marginal cost is estimated to be $24 per unit produced. The                deadweight loss associated with this negative externality will be $    ????

BN12.2 (a) Case: The market for dry cleaning is reflected by the demand and supply curves (Q is in thousands): Pa = 5-Q Ps= 2+2Q Producing dry cleaning creates ground water pollution with a constant marginal external cost of 1.2. Question: (a) Sketch a graph that shows the Dsoc, Spriv, Ssoc, Qopt (societal perspective) and DWL in an unregulated market (No need to label the values in the graph)?

Given the following information:  Initially, a perfectly competitive market for a product is in equilibrium, with an upward-sloping straight-line market supply curve, a downward-sloping straight-line market demand curve, and a market price of $30 per unit.  Consumption of this product causes pollution.  Initially, the marginal external cost of the pollution caused by consuming the product is $9 per unit.  There is no government policy toward the externality. The government then mandates a shift to a new product version, and all firms adopt and produce the latest version.  Consumers view the new product version as equally as good as the initial product version. Consumption of the new version of the product causes less pollution, and the marginal external cost decreases by $3 per unit.  For each firm, production of the new product version does not change fixed cost, but it does increase average variable cost by $3 per unit. If necessary, the market adjusts to a new equilibrium.  There is…