Homework Answers
True
Explanation: When there is a negative externality, social cost exceeds private cost. Therefore, the quantity produced is higher than the socially optimal level.
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Question 6 (1 point) If we assume that the production process of good X results in...
Question 2 (1 point) A positive externality results in the market quantity being less than the...
Question 2 (1 point) A positive externality results in the market quantity being less than the socially optimal quantity True False Question 3 (1 point) Which of the following is a pure public good? National Defense Police protection Bottled water Education
57. The following figure shows the market supply and demand of a good whose production entails...
57. The following figure shows the market supply and demand of a good whose production entails a $2 negative externality per unit. Refer to the figure above. A total of ________ units of this good will be traded in this market, at the price of ________. a. 20; $2 b. 60; $8 c. 40; $4 d. 80; $6 58. The following figure shows the market supply and demand of a good whose production entails a $2 negative externality per unit....
6. (16 points) Suppose we realize that the market described in question 1 (Market demand is...
6. (16 points) Suppose we realize that the market described in question 1 (Market demand is still Q = 18 – P) has a negative externality. The cost function C(Q) = Q2 is private cost. We now know the cost of the externality is Ca(Q)=Q?. a. What is the marginal cost of the externality, MCE? b. What is the marginal cost to society of production MCS? c. What is the Socially Optimal quantity and price? d. How does the socially...
We are considering a market with marginal cost of P=100+2Q and a demand of P=500-2Q. Use...
We are considering a market with marginal cost of P=100+2Q and a demand of P=500-2Q. Use that information to answer the following questions. a. Find the market equilibrium (price and quantity in the market). b. Find producer and consumer surplus. c. Now imagine production of this good created a negative externality of 1$ per unit of output. Find the socially optimal outcome (price and quantity) taking this externality into account. d. Find consumer and producer surplus at the socially efficient...
Question 6 (1 point) The following equations represent the MWTP (demand) function and the private MC...
Question 6 (1 point) The following equations represent the MWTP (demand) function and the private MC functions in the market for some good where a negative externality (such as pollution) results in damages of $12 per unit of the good produced. MWTP 400 QD MPC 55+0.5QS The market equilibrium level of output will be equal to units. Question 7 (1 point) The following equations represent the MWTP function and the private MC function in the market for some good where...
= 18 - 1. Suppose we realize that the market described in question 1 (Market demand...
= 18 - 1. Suppose we realize that the market described in question 1 (Market demand is still Q P) has a negative externality. The cost function Cp(Q) = { Q2 is private cost. We now know the cost of the externality is Ce(Q) = Q2. a. What is the marginal cost of the externality, MCE? b. What is the marginal cost to society of production MCs? c. What is the Socially Optimal quantity and price? d. How does the...
Consider a manufactured good whose production process generates pollution. The annual demand for the good is...
Consider a manufactured good whose production process generates pollution. The annual demand for the good is given by Qd = 100 − 3P. The annual market supply is given by Qs =P. In both equations, P is the price in dollars per unit. For every unit of output produced, the industry emits one unit of pollution. The marginal damage from each unit of pollution is given by 2Q. Find the socially optimal quantity of the good. What is the socially...
Question 15 (1 point) When the production of a good generates a negative externality: OA) government...
Question 15 (1 point) When the production of a good generates a negative externality: OA) government will maximize economic efficiency by leaving the market alone. The government in this situation should always pursue Laissez Faire. N OB) the government could increase economic efficiency by taxing the good producing of the negative externality. OC) the government could increase economic efficiency by subsiding the good producing of the negative externality. OD) the government could increase economic efficiency by reducing regulations on the...
Question 3. Externality and Market Power, 30 points) Consider an electricity market. Assume that the demand...
Question 3. Externality and Market Power, 30 points) Consider an electricity market. Assume that the demand for electricity is P = 40 - Q amd the cost of producing electivity is C(q) = 20+ 0.50Q2. We assume that the production of electiricity may lead to emission to the society. We assume that each unit of production creates an externality. which amounts to 10 (per unit of production). 1. Derive a socially efficient amount of production. 2. Derive an equilibrium quantity...
Question 1 (1 point) Suppose the market demand for a certain good is represented by the...
Question 1 (1 point) Suppose the market demand for a certain good is represented by the equation MWTP-490- 0.25QD, and the market supply is given by MC 40 + 2QS. Assuming the absence of market failures, the socially efficient level of output equals_units. Question 2 (1 point) Suppose market demand for a certain good is represented by MwTP-490-0.25QD and the socially efficient price equals Question 3 (1 point) Suppose market demand for a certain good is represented by MWTP 490...
Question 2 (1 point) A positive externality results in the market quantity being less than the socially optimal quantity True False Question 3 (1 point) Which of the following is a pure public good? National Defense Police protection Bottled water Education
6. (16 points) Suppose we realize that the market described in question 1 (Market demand is still Q = 18 – P) has a negative externality. The cost function C(Q) = Q2 is private cost. We now know the cost of the externality is Ca(Q)=Q?. a. What is the marginal cost of the externality, MCE? b. What is the marginal cost to society of production MCS? c. What is the Socially Optimal quantity and price? d. How does the socially...
Question 6 (1 point) The following equations represent the MWTP (demand) function and the private MC functions in the market for some good where a negative externality (such as pollution) results in damages of $12 per unit of the good produced. MWTP 400 QD MPC 55+0.5QS The market equilibrium level of output will be equal to units. Question 7 (1 point) The following equations represent the MWTP function and the private MC function in the market for some good where...
= 18 - 1. Suppose we realize that the market described in question 1 (Market demand is still Q P) has a negative externality. The cost function Cp(Q) = { Q2 is private cost. We now know the cost of the externality is Ce(Q) = Q2. a. What is the marginal cost of the externality, MCE? b. What is the marginal cost to society of production MCs? c. What is the Socially Optimal quantity and price? d. How does the...
Question 15 (1 point) When the production of a good generates a negative externality: OA) government will maximize economic efficiency by leaving the market alone. The government in this situation should always pursue Laissez Faire. N OB) the government could increase economic efficiency by taxing the good producing of the negative externality. OC) the government could increase economic efficiency by subsiding the good producing of the negative externality. OD) the government could increase economic efficiency by reducing regulations on the...
Question 3. Externality and Market Power, 30 points) Consider an electricity market. Assume that the demand for electricity is P = 40 - Q amd the cost of producing electivity is C(q) = 20+ 0.50Q2. We assume that the production of electiricity may lead to emission to the society. We assume that each unit of production creates an externality. which amounts to 10 (per unit of production). 1. Derive a socially efficient amount of production. 2. Derive an equilibrium quantity...
Question 1 (1 point) Suppose the market demand for a certain good is represented by the equation MWTP-490- 0.25QD, and the market supply is given by MC 40 + 2QS. Assuming the absence of market failures, the socially efficient level of output equals_units. Question 2 (1 point) Suppose market demand for a certain good is represented by MwTP-490-0.25QD and the socially efficient price equals Question 3 (1 point) Suppose market demand for a certain good is represented by MWTP 490...
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