If production causes an external cost and the supply including the externality is given by 1/3P=Q....

If production causes an external cost and the supply including the externality is given by 1/3P=Q. What is the socially efficient level of of production if demand is Q=30−1/2P?

Solutions

Expert Solution

Demand equation: Q = 30 - (1/2)P

Supply equation: (1/3)P = Q

At socially efficient level, demand = supply

=> (1/3)P = 30 - (1/2)P

=> (1/3)P + (1/2)P = 30

=> (2P + 3P) / 6 = 30

=> 5P / 6 = 30

=> P = (30 *6 / 5)

=> P = 36.

Put P =36 in supply function:

Q = (1/3)P

=> Q = (1/3)*36

=> Q = 12

Socially efficeint level of output is 12 units

Rahul Sunny answered 2 years ago

Next > < Previous

Related Solutions

What might be an example of an external cost associated with the oil production (including oil...

What might be an example of an external cost associated with the oil production (including oil transportation) described in the mock interview? If a firm’s price of its product did, in fact, include all external costs, how would this change production decisions?

A supply curve is given by QS = 4 + 3P. Draw the supply curve. You...

A supply curve is given by QS = 4 + 3P. Draw the supply curve. You don't have to draw to scale. Clearly show what happens on this supply curve when the price falls from $18 to $15. Label all appropriate points, as well as numerical values for prices and quantities. Include arrows to clarify.

13-4) Demand is given by QD = 800 - 3P, and supply is given by QS...

13-4) Demand is given by QD = 800 - 3P, and supply is given by QS = -400 + 7P. A) Find the equilibrium price and quantity. (5 points) B) Compute the price elasticity of demand and the price elasticity of supply at the equilibrium. (6 points) C) In a diagram, show the consumer and producer surplus at the equilibrium. Explain these surpluses. (6 points)

Market demand is given as Qd = 200 – 3P. Market supply is given as Qs...

Market demand is given as Qd = 200 – 3P. Market supply is given as Qs = 2P + 100. In a perfectly competitive equilibrium, what will be price and quantity? Price will be $20 and quantity will be 140. Price will be $50 and quantity will be 260. Price will be $100 and quantity will be 300. Price will be $140 and quantity will be 380.

A production function is given by q = L1/3K1/3 and a total cost function is given...

A production function is given by q = L1/3K1/3 and a total cost function is given by TC = q2/3. Under what conditions could these belong to the same firm?

A production function is given by q = L1/5K1/5 and a total cost function is given...

A production function is given by q = L1/5K1/5 and a total cost function is given by TC = q2/5. Under what conditions could these belong to the same firm?

The market demand is given as; P = 100 – Q Marginal cost of production is...

The market demand is given as; P = 100 – Q Marginal cost of production is given as; MC = 10 Calculate the level at which market decides to produce and market price Total Revenue ( TR) and Total Cost (TC) Economic Profit (π) Identify the market structure; either perfect competition or monopoly?

Q- A firm’s short-run cost function for the production of gizmos is given by the following...

Q- A firm’s short-run cost function for the production of gizmos is given by the following expression: C(y) = 10y2 + 200y + 100 000. Draw the cost function C(y) and calculate; A- Calculate the range of output over which it would be profitable for this firm to produce gizmos if it can sell each gizmo for $2400. Calculate the value of the output that maximizes this profit. Calculate the value of maximum profit B- Repeat these calculations and explain...

The demand and supply for a product is given by: Qd: 300-5P Qs: 3P-100 Suppose the...

The demand and supply for a product is given by: Qd: 300-5P Qs: 3P-100 Suppose the government imposes a tax T=$16 Calculate: A) Consumer surplus after tax B) Producer surplus after the tax C) Government Revenue D) Deadweight Loss

Consider the case of a positive consumption externality. Suppose demand and supply are given by: Demand:...

Consider the case of a positive consumption externality. Suppose demand and supply are given by: Demand: Xd=(A-P)/α Supply: Xs=(B+P)/β where P is the price of the good, Xd is the quantity of good demanded, Xs is the quantity of good supplied, and A, B, α, and β are parameters. Answer the following questions. Note that graphs will be helpful in your analysis. However, make sure to provide mathematical derivations of the solutions. Derive the competitive equilibrium price and output level....

Subjects