Macroeconomics (7th Edition)
Macroeconomics (7th Edition)
7th Edition
ISBN: 9780134738314
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 4, Problem 4.2.5PA
To determine

The deadweight loss relative to marginal cost and benefit.

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The market for plasticans is perfectly competitive. Market Supply is given by Q=5P and Market Demand is given by Q=462-2P. Each extra unit of plastican produced imposes a negative externality of $6. What is the (absolute value of) Deadweight Loss due to the externality? Enter a number only, drop the $ sign. Do NOT include a negative sign.
Define Deadweight loss. When does it occur?
Assume there is a positive externality associated with having a tertiary education. Is the deadweight loss from the subsidy increased or decreased with the introduction of the positive externality? Why?

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Macroeconomics (7th Edition)

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