b) The inverse demand facing a farm sector is denoted by p= 20-x where x is output, and p is output price. The sector's activities also generate positive externalities and the marginal externality benefits is MEB = 10-0.5x. The marginal cost of production is MC = 2+x. Required: i) How much output will be produced and at what consumer price if the industry operates as a monopoly in the output market? ii) What will be the welfare loss in this case? iii) How much will be produced under competition and at what price? iv) What policies can be used to attain the social optimum?

b) The inverse demand facing a farm sector is denoted by p= 20-x where x is output, and p is output price. The sector's activities also generate positive externalities and the marginal externality benefits is MEB = 10-0.5x. The marginal cost of production is MC = 2+x. Required: i) How much output will be produced and at what consumer price if the industry operates as a monopoly in the output market? ii) What will be the welfare loss in this case? iii) How much will be produced under competition and at what price? iv) What policies can be used to attain the social optimum?

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter14: Environmental Economics

Section: Chapter Questions

Problem 11SQ

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The paper industry has the demand and supply curves shown below: Price of paper Quantity demanded Quantity supplied 2 80 40 3 70 50 4 60 60 5 50 70 Suppose that this industry results in extreme externalities. What can be said about its optimal output? Draw the supply and demand curves for paper. Does the supply curve reflect the true social costs of producing the product? If not will a supply curve reflecting the true social costs lies above or below the supply curve you have drawn? What is the equilibrium price of paper? From the point of view of reflecting the true social costs, is this price the correct one, or too low or too high?
The paper industry has the demand and supply curves shown below: Price of paper Quantity demanded Quantity supplied 2 80 40 3 70 50 4 60 60 5 50 70 Suppose that this industry results in extreme externalities. What can be said about its optimal output? Draw the supply and demand curves for paper. Does the supply curve reflect the true social costs of producing the product? If not will a supply curve reflecting the true social costs lies above or below the supply curve you have drawn?
3) A chemical company can produce Q units of a chemical H, with marginal costs of MC = 9 + Q. and can distribute the chemical at marketing marginal costs of MC = 1. The demand for His given by P = 30-1.5Q. If an external market exists where H can be bought or sold without marketing expenses for $13, how much H should the firm produce? 00 units 4 units 05 units 07 units 10 units
2) Suppose that leather is sold in a perfectly competitive industry. The industry short-run supply curve (marginal cost curve) is P = MC = 3Q, where Q is measured in millions of hides per year. The inverse demand for leather hides is given by P = 60-7Q. a. Find the equilibrium market price and quantity sold. b. Suppose that the leather tanning releases chromium and other pollutants into local waterways. The external marginal cost is estimated to be $4 for each hide produced. Calculate the socially optimal level of output and price for the tanning industry.
1) a. what is the profit maximizing quantity of the good for The industry (Q1) when it is not forced to consider the externality? The profit-maximizing quanity for the industry (Q1) is: b. what is the profit maximizing quantity for the representative individual firm (q1)?
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Only typed answer You are an industry analyst that specializes in an industry where the market inverse demand is P = 100 - 3Q. The external marginal cost of producing the product is MCExternal = 6Q, and the internal cost is MCInternal = 14Q. Instruction: Round your answers to the nearest two decimal places. a. What is the socially efficient level of output? units b. Given these costs and market demand, how much output would a competitive industry produce? units c. Given these costs and market demand, how much output would a monopolist produce? units d. Which of the following are actions the government could take to induce firms in this industry to produce the socially efficient level of output. Instructions: You may select more than one answer. Click the box with a check mark for the correct answers and click twice to empty the box for the wrong answers. You must click to select or deselect each option in order to receive full credit. Pollution taxes…