Homework Answers
a) This is a negative externality
b) The social marginal cost is represented by MC-1 curve
c) Output = 60 megawatts
d) Social efficient amount = 40 megawatts
e) The government will tax
f) Tax = 70-50 = 20 per megawatt
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6. (20 pts.) Suppose that an electric power plant is located close to a well-populated city....
The market below exists for electricity produced by coal at a power plant in Tennessee. The...
The market below exists for electricity produced by coal at a
power plant in Tennessee. The marginal private cost (MPC) curve
represents the private costs of the power plant to produce
electricity from coal. Coal-fired electricity generation, however,
also produces an externality. Production creates emissions that can
harm human health, contribute to greenhouse gas emissions, and
degrade ecosystems. The marginal social cost (MSC) curve represents
the cost of coal-fired electricity production in Tennessee,
including the costs borne by society. Use...
Let's look at the case of a small island nation with a single plant producing electricity Assume for the purpose of...
Let's look at the case of a small island nation with a single plant producing electricity Assume for the purpose of question 2 that the MC is upward sloping. a. First assume there are no externalities of any kind 2. i. Draw the demand, marginal revenue and (private and social) marginal cost curves of this monopoly ii In the graph drawn label the (1) profit maximizing quantity and (2) socially efficient quantity Now suppose the production of electricity causes a...
QUESTION 17 Suppose a firm produces pollution when it generates electricity. The cost of the pollution...
QUESTION 17 Suppose a firm produces pollution when it generates electricity. The cost of the pollution is called the private marginal cost. social marginal cost. marginal cost. external marginal cost QUESTION 18 Someone smoking in a crowded room is an example of a positive production externality. a negative production externality. a negative consumption externality. not an externality QUESTION 19 The cyclical deficit is the portion of the deficit created by business cycle fluctuations in GDP that is the result of...
3. Suppose that a firm that is refining raw materials also pollutes the water, a public...
3. Suppose that a firm that is refining raw materials also pollutes the water, a public health concern. The marginal costs of the raw materials are MPC, but the pollution cost is MEC (marginal external cost). The total social cost MSC = MEC + MPC. Use the figure below to answer the following questions: MSC = MPC + MEC Price MPC Quantity . Qe Qi Qo a. What is the equilibrium price and quantity, assuming that the pollution is not...
Suppose a firm’s marginal abatement function is given by MAC = 120 –2.5E, and it faces...
Suppose a firm’s marginal abatement function is given by MAC = 120 –2.5E, and it faces a $110 per unit emissions tax. Suppose damages caused by this firm’s pollution is given by the function MD = 5E. a) To achieve social efficiency, how many units of emissions should the firm abate? b) What size per unit tax will give the firm an incentive to abate to the socially efficient level of emissions? c) If the firm abates to the socially...
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...
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...
21. By including the costs from negative externalities imposed on society, an efficient level of output...
21. By including the costs from negative externalities imposed on society, an efficient level of output will be produced when: (a) marginal benefit equals opportunity cost. (b) marginal private benefit equals marginal private cost. (c) market demand equals marginal private cost. (d) marginal private cost equals marginal social cost. (e) marginal benefit equals marginal social cost. 22. What is NOT an example of a positive externality? (a) Improved educational outcomes in society. (b) Winning $1 million dollars at the casino...
Consider the market for private economics help. Assume it is perfectly competitive. The market's inverse demand curv...
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Suppose the demand (i.e. the private marginal benefit) for industrial grade stink bombs is given by...
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The market below exists for electricity produced by coal at a
power plant in Tennessee. The marginal private cost (MPC) curve
represents the private costs of the power plant to produce
electricity from coal. Coal-fired electricity generation, however,
also produces an externality. Production creates emissions that can
harm human health, contribute to greenhouse gas emissions, and
degrade ecosystems. The marginal social cost (MSC) curve represents
the cost of coal-fired electricity production in Tennessee,
including the costs borne by society. Use...
Let's look at the case of a small island nation with a single plant producing electricity Assume for the purpose of question 2 that the MC is upward sloping. a. First assume there are no externalities of any kind 2. i. Draw the demand, marginal revenue and (private and social) marginal cost curves of this monopoly ii In the graph drawn label the (1) profit maximizing quantity and (2) socially efficient quantity Now suppose the production of electricity causes a...
QUESTION 17 Suppose a firm produces pollution when it generates electricity. The cost of the pollution is called the private marginal cost. social marginal cost. marginal cost. external marginal cost QUESTION 18 Someone smoking in a crowded room is an example of a positive production externality. a negative production externality. a negative consumption externality. not an externality QUESTION 19 The cyclical deficit is the portion of the deficit created by business cycle fluctuations in GDP that is the result of...
3. Suppose that a firm that is refining raw materials also pollutes the water, a public health concern. The marginal costs of the raw materials are MPC, but the pollution cost is MEC (marginal external cost). The total social cost MSC = MEC + MPC. Use the figure below to answer the following questions: MSC = MPC + MEC Price MPC Quantity . Qe Qi Qo a. What is the equilibrium price and quantity, assuming that the pollution is not...
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...
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...
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