Question

19%D Tue 10:09 ks Window Help ng cengage.com n subject) - mramadegmail.co Inbox (001-mamad72a Mind Teo - Cengage Learning Search: CENGAGE MINDTAP Homework (Ch 10) Attempts: Keep the Highest: 13 1. The effect of negative externalities on the optimal quantity of consumption Consider the market for paper. Suppose that a paper factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory Producing an additional ton of paper imposes a constant external cost of $225 per ton. The following graph shows the demand (private value) curve and the supply private cost) curve for paper. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $225 per ton. Social Cost Supply Private Cost PRICE (Dolars per ton of paper) Demand Private Value) MacBook Air

Answer 1

The external cost is $ 225 per ton thus the social cost would be less than the equilibrium quantity.

Q	Price	Private + External cost = Social Cost
1	1350	150 + 225 = 375
2	1050	300 + 225 = 525
3	750	525 + 225 = 750
4	450	675 + 225 = 900
5	300	825 + 225 = 1050
6	225	975 + 225 = 1200

The market equilibrium quantity is 3.5 tons of paper. Socially efficient paper production = 3 tons of paper.

To create an incentive for the firm to produce the socially optimal quantity of paper, the government could impose a tax of $ 225 paper per ton.

I am really sorry I don't have access to the graphing tool thus I have constructed it manually please accept it it would be great help to me.

Supply Private Cost) PRICE (Dollars per ton of paper) Demand Private Value) 23 QUANTITY (Tons of paper)

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