Question

Now suppose that the economist on the faculty at SCU determines that there is a production externality associated with this good, such that, the social supply curve (SMC) is represented by the following equation: Qs Social = 200*P. Note, the other curves are still represented by the following 3 equations: Qs Private = 100*P, Q Private = 1,000-100*P, and Q, Social = 2,000-200*P. Again, assume no government or any additional market failures. Please draw a supply and demand diagram with each of the following items clearly indicated on the graph. If an item below does not exist explicitly state that it does not exist (5 points): (iv) (i) PMC curve (make sure you clearly label at least two points along the supply curve) (ii) SMC curve (make sure you clearly label at least two points along the supply curve) (iii) PMB curve (make sure you clearly label at least two points along the demand curve) SMB curve (make sure you clearly label at least two points along the demand curve) (v) Market price (vi) Market quantity (vii) Social optimum quantity (viii) Total External Benefit (ix) Total External Cost (x) DWL

Answer 1

Os me pisos doop (RA) is helmet DD Soud DD looo 2002 Private Market cam when Met Benefit brivate cost 4 1000 loop = loop IP5 Market Oty 2500 sovelly optimal oby مهكره لسموک و 200 p = 2000-zoop you p=2000 IPS a sous optina Oty=1000 Total Extern and Bluefit when &=500 m = 500005 4 Ps= 1500 200 = 7.5 Externer Beneft - 251500)=1250.