Consider a competitive market in which the MPB = 180 – 2q and the MSC = q. In this market, however, there is a positive consumption externality of $60 per unit consumed. What is the efficient level of output in this market? A. 60 B. 80 C. 70 D. 90 E. 100
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- Consider a competitive market in which the MPB = 129-3q and the MSC =3q. In this market, however, there is a positive consumption externality of $50 per unit consumed. What is the efficient level of output in this market? [Round your answer to two decimal places when needed]The market for perfume is characterized by: MPB=200-Q and MPC= 3Q with a marginal social benefit of -$12 caused by the others smelling the perfume. The externality is ______ and on the _____ side of the market. The inefficient quantity is ______ and the price is _____. The allocatively efficient quantity in the market is ______. If the government were to correct the externality, it would _______ the market by $______ per unit of perfume. Word Bank: negative, demand, 50, 150, 47, tax, 12, positive, supply, subsidySuppose that a chemical manufacturing plant is releasing nitrogen oxides into the air, and these emissions are associated with health and ecological damages. Economists have estimated the following marginal costs and benefits for the chemical market, where Q is monthly output in thousands of pounds and P is price per pound. MSB = 50 – 0.4Q MSC = 2 + 0.4Q MEB = 0 MEC = 0.2Q. Find the efficient equilibrium, QE and PE.
- Imagine a firm with a marginal abatement cost (MAC) function equal to: MAC = 32 - 4E. The government offers a $8 per-unit subsidy for abatement. In principle, the firm could ignore the subsidy and continue to emit as many emissions as it was in the absence of government intervention, but there is money to be made from cutting back its emissions. Compared to ignoring the subsidy, how much money could a cost-minimizing firm save or make by cutting back its emissions? (Hint: remember that firms trade off the benefits of the subsidy with the costs of abatement when deciding how much to abate) Answer:Lecture: Externality - Pigou8. All-Leather is a tanning company located on Lake Michigan in Chicago. Its total cost functionis C(QA) = 125 + 8QA + 5QA2, where QA is leather production per week in thousands of pounds.a) If leather sells for $408 per thousand pounds, how much leather will All-Leather produce?How much profit does All-leather earn?Enjoy is a beverage company located on Lake Michigan near All-Leather in Chicago. Enjoy’sproduction of beverages is negatively affected by water pollution from All-Leather’s productionof leather. Enjoy’s total cost function to produce beverages isC(QE) = 10QE +3QE2 + 3QA2where QE is Enjoy’s weekly production of beverages, in thousandsof gallons and, as above, QA is All-Leather’s weekly production of leather.b) Is this an example of a pecuniary externality or a real externality? Explain.c) What is the extra cost to Enjoy from an additional thousand tons of leather production by AllLeather (i.e., the external marginal cost of an extra unit of QA…Consider the production and sale of Good B. Suppose that the “Social Value” of each unit of Good B is greater than the “Willingness to Pay” of the individual who consumes that unit. There are NO externalities associated with the production or consumption of Good B, and Good B is sold in a competitive market. Suppose that the “Efficient” level of output for Good B is 400,000 units. Is the market equilibrium level of output greater than 400,000, less than 400,000, or equal to 400,000 ( just circle your answer; you don’t have to explain)?
- Save The market price of insecticide is initially $10 per unit. To address a negative externality in this market, the government decides to charge producers of insecticide for the privilege of polluting during the production K process. A fee that fully takes into account the social costs of pollution is determined, and once it is put into effect, the market supply curve for insecticide shifts upward by $8 per unit. The market price of insecticide also increases, to $12 per unit. What fee is the government charging insecticide manufacturers? $ (Enter a numeric response using an integer.)Consider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC_1=11-2E_1 MAC_2=7-E_2₁ and assume marginal external damages (MED) from the aggregate emissions of both firms (E_Agg=E_1 + E_2) is: MED = E_Agg Total abatement costs (TAC) for both firms at the socially efficient level of aggregate emissions (E_Agg) Answer:QUESTION 16 Consider a market where the demand and supply for the good are described by the following equations: Qo 225 3P and Qs = - 22.5 + 1.5P !3! If the market is perfectly competitive, the good is rival and excludable, and there are no externalities, the total surplus is C$1,933.00 $600.00 C$1,800.00 $1,200.00
- Draw a graph that models a positive externality in consumption (label and clearly explain graph) Explain: i) The difference between the competitive equilibrium quantity and the socially optimal level quantity. ii) A possible intervention to bring the competitive equilibrium quantity closer to the socially optimal quantity. iii) An example of a setting in which this type of externality might occur (explain clearly how/why this externality happens).Define negative and positive externalities and analyze their effect on resource allocationsConsider two firms with the following marginal abatement costs (MAC) as a function of emissions (E): MAC, = 11 - 2E1 , MAC2 = 7 - E2, and assume marginal external damages (MED) from the aggregate emissions of both firms (EAgg = E1 + E2) is: MED = EAgg. Total abatement costs (TAC) for both firms at the socially efficient level of aggregate emissions is (round your answer to the nearest integer): Answer: