Suppose that demand is given by P = 20 - Qd and supply is given by...

Suppose that demand is given by P = 20 - Qd and supply is given by P = 4 + Qs. Which of the following could represent the Social Marginal Benefit and Social Marginal Cost curves if there is a negative production externality?

		P = 16 - Qd and P = 2 + Qs
		P = 24 - Qd and P = 4 + Qs
		P = 20 - Qd and P = 2 + Qs
		P = 20 - Qd and P = 8 + Qs

Expert Solution

The normal demand and supply curves capture price paid and received by individuals. The costs or benefits to society (externality) are not considered in a routine demand and supply graph.

In case of negative externality the the costs to society are higher than the one reflected by the supply curve. In other words the social cost curve is further left to the quantity supplied curve. In case of positve externality the benefit curve is right to the the quantity demanded curve.

In view of the above explanation, we find that the social marginal cost curve P = 8 + Qs (intersects the Y-axis at 8) is left to the quantity supplied curve P = 4+ Qs (intersects Y - axis at 4). Further the quantity demanded curve and social marginal benefit curve are overlapping for negative externality (as there is movement only when there is a positive externality and no shift for negative externality)

Therefore, the fourth option P = 20 - Qd and P = 8 + Qs is the correct alternative.

Rahul Sunny answered 1 year ago

Suppose demand and supply are given by Qd = 50 - P and Qs = 1.0P -...

Suppose demand and supply are given by Qd = 50 - P and Qs = 1.0P - 20. a. What are the equilibrium quantity and price in this market? Equilibrium quantity: ______________ Equilibrium price: $ ___________________ b. Determine the quantity demanded, the quantity supplied, and the magnitude of the surplus if a price floor of $44 is imposed in this market. Quantity demanded: ______________ Quantity supplied: ______________ Surplus: ________________ c. Determine the quantity demanded, the quantity supplied, and the magnitude of...

Suppose there is a market and its competitive equilibrium. Demand P= 100-QD Supply P = 20...

Suppose there is a market and its competitive equilibrium. Demand P= 100-QD Supply P = 20 + QS/3. The government introduces the a subsidy of s = $4 per unit of good sold and bought. (a) Draw the graph for the demand and supply before subsidy, carefully determining all intercepts and relevant intersection points. (b) What is the equilibrium price and quantity before the subsidy and after the subsidy? (in the subsidy case, what price the buyers pay and what...

PLEASE SHOW WORK Suppose demand and supply are given by Qd = 40 - P and...

PLEASE SHOW WORK Suppose demand and supply are given by Qd = 40 - P and Qs = 1.0P - 20. a. What are the equilibrium quantity and price in this market? Equilibrium quantity: Equilibrium price: $ b. Determine the quantity demanded, the quantity supplied, and the magnitude of the surplus if a price floor of $34 is imposed in this market. Quantity demanded: Quantity supplied: Surplus: c. Determine the quantity demanded, the quantity supplied, and the magnitude of the...

The demand and supply equations for a product are given by QD = 20-P QS = -10 +2P

The demand and supply equations for a product are given by QD = 20-P QS = -10 +2P 1. Calculate the equilibrium price and quantity. 2. Calculate the price elasticity of demand and the price elasticity of supply at the above equilibrium point. 3. An excise tax of $1 per unit is imposed on the producers of the product. Calculate the new equilibrium price and quantity. Calculate the consumer and producer tax burden ( as a percentage of...

Demand is given by the equation QD=100-P; supply is given by QS= 4P Suppose the world...

Demand is given by the equation QD=100-P; supply is given by QS= 4P Suppose the world price of each unit is $25. Now assume that this economy is open to world trade. How many units will they import or export? Calculate the consumer surplus, producer surplus and total surplus. Help me solve, A Continue to assume that this economy is open to world trade. Suppose the government enacts a tariff off $2 per pound of cocoa beans. Calculate the consumer...

Suppose that the demand for bananas is given by: Qd(p) = 1,500,000 – 50000p where Qd(p)...

Suppose that the demand for bananas is given by: Qd(p) = 1,500,000 – 50000p where Qd(p) is quantity demanded in kilograms of bananas and p is the price. Further suppose that there are many identical sellers in the domestic market who can each choose to plant bananas. If a seller chooses to produce bananas, she will incur a planting cost of $2.00 per kilogram at the beginning of the year and must pay an additional $0.50 per kilogram to harvest...

Suppose market demand and supply are given by Qd= 400-12P and Qs= -20 + 8P. If...

Suppose market demand and supply are given by Qd= 400-12P and Qs= -20 + 8P. If a price floor of $20.00 is imposed, there will be a surplus of 10 units. there will be neither a surplus or shortage. there will be a shortage of 16 units. None of the above choices makes any sense in this case.

Suppose the market demand for cigarettes is: QD = 10 − P, and the supply of...

Suppose the market demand for cigarettes is: QD = 10 − P, and the supply of cigarettes is: QS = −2 + P, where P is the price per pack of cigarettes a. Graph the supply and demand curves. b. What is the equilibrium price and quantity sold of cigarettes? Show this on the graph. If the government imposes a cigarette tax of $1 per pack, c. What is the price paid by consumers? d. What is the price faced...

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

Market demand is given as Qd = 200 – P. Market supply is given as Qs = 4P. a. Calculate equilibrium price and quantity a. If an excise tax of $4 per unit is imposed on sellers, calculate the price consumers pay Pc and the price sellers receive Ps. c. Also, calculate the dead weight loss and consumer surplus after the tax.

market demand is given as QD = 40 – P. Market supply is given as QS...

market demand is given as QD = 40 – P. Market supply is given as QS = 3P. Each identical firm has MC = 5Q and ATC = 3Q. What is the number of firms in the market?

Question