Question

Widgets are a necessary part of modern life, but they are also associated with considerable pollution and pollution-related externalities. Consider the private market for widgets described by the following private marginal benefit (MB) and private marginal cost (PMC) curves:

???? = 100 − 0.15??

PMC = 4 + 0.06????.

where ?? is the quantity demanded and ?? is the quantity supplied. Assume here that output (?? and ??) varies from 0 to 1000. After plotting these curves, use them to answer the following

questions. (This question requires graphing for several parts—you can put all of your curves on the same figure. At the very least, I would like for you to try using Excel to plot the lines.)

1. a) (5points)Generate a graph of the MB and PMCcurves.

Answer 1

To get the same graphs as I have, I suggest you plug in values in an Excel sheet.

In the first column, enter all values from 0-1000 using Ctrl+Drag. In the first cell of the second column (suppose we want values of MB there), enter: "= 100 - (0.15*A1)". Again, press Ctrl, click and drag along the row. You'll get values of MB for the given range. In the first cell of the second column, enter "=4 + (0.06*A1)" and repeat the above process. You'll get values of PMC. Thus, you have three columns filled with necessary data. This will look like:



Once you have the data, plotting the graph is easy. Select the second column to plot MB. In the Insert tab, you'll find an option for Line Chart (under the heading Charts). The graphs are as shown:

1) For MB vs Q:

2) For PMC vs Q:



Hope this helped!