A) What kind of externality is this? B) What is the efficient quantity?

10 950 Supply 8.50 МЕВ 8 7.50 Demand 50 60 70 80 90 110 120 100

A) What kind of externality is this?

B) What is the efficient quantity?

C) What is the DWL of this externality?

D) If a pigouvian tax/subsidy is used, what will be selected?

Solutions

Expert Solution

A) Marginal social benefit is greater than demand or marginal private benefit. It means it's a positive Externality.

B) Efficient quantity occurs at the point where MSB = supply. That is, efficient quantity is 100 units.

C) DWL = (1/2) * (100 - 80)* (9 - 8) = $10

D)As it's a positive Externality, a pigouvian subsidy should be used to move the demand curve towards the MSB curve and therefore internalize the Externality.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Consider the statement: “A market with a negative externality will produce more than the efficient quantity...

Consider the statement: “A market with a negative externality will produce more than the efficient quantity of the good, creating a deadweight loss.” Do you agree or disagree? Explain clearly. You may use a graph to help you explain

(a) What are the key features of an efficient market? (b) If a market is efficient...

(a) What are the key features of an efficient market? (b) If a market is efficient how will share prices vary? (c) Most investment managers are now looking to invest in a range of different countries. Describe the three categories of risk that they need to consider and give three examples of each category.

Question 1 A. Define an externality. B. Distinguish a negative externality from a positive externality, and...

Question 1 A. Define an externality. B. Distinguish a negative externality from a positive externality, and give one example of each. C. What is meant by a production externality as opposed to a consumption externality? D. Give one example of a negative production externality and one of a positive consumption externality.

In the long run the perfectly competitive Firm will produce the allocative efficient quantity of a Product and the production efficient quantity of the Product

In the long run the perfectly competitive Firm will produce the allocative efficient quantity of a Product and the production efficient quantity of the Product, although their goal is to produce a profit Maximizing or loss minimizing quantity of a product

think of a positive or negative externality that youve witnessed. explain why it is that kind...

think of a positive or negative externality that youve witnessed. explain why it is that kind of externality. was anything done to adjust for this externality? What should be done?

What kind of quantity is length? ratio ordinal interval nominal What type of graph is best...

What kind of quantity is length? ratio ordinal interval nominal What type of graph is best for expressing percentages of a whole? We are selecting seven CD's out of twelve to take the mountains. How many possible selections are there, given that order doesn't matter? Karen scored a 76 on an exam whose mean is 74 and whose standard deviation is 8. Find her z score. At a college, 60% of the students are women. If we select 7 students...

(a) What is "zeolite"? and what is the nature of its acidity? (b) By what kind...

(a) What is "zeolite"? and what is the nature of its acidity? (b) By what kind of experiments can one determine the zeolite has Brönsted or Lewis acidic sites?

What kind of defects could occur in: a. Extrusion b. Rolling

 (a) What are the various classifications of mortar? (b) In accordance with ‘kind of binding...

 (a) What are the various classifications of mortar? (b) In accordance with ‘kind of binding material’, mortars are classified into five basic categories. List and explain

Calculate average total cost, what is the most efficient (minimum ATC) output quantity given the costs...

Calculate average total cost, what is the most efficient (minimum ATC) output quantity given the costs below? What should be the cost to produce 900 units? Average Total Average Variable Step Fixed Total Output Cost Cost Cost Cost 0 $ 0 $50,000 $500,000 _________ 150 1,000 100,000 500,000 _________ 300 950 100,000 500,000 _________ 450 1,000 100,000 500,000 _________ 600 1,200 200,000 500,000 _________ 750 1,500 200,000 500,000 _________ 900 1,800 300,000...

Subjects