The supply and demand of sugar are given as Qs = 5P, Qd = 250- P where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar. Assuming that sugar is sold in a competitive market, What is the market price? How many tons of paper will be produced per year at that price? What is the efficient output of paper? What is the amount of total Pigouvian tax to achieve efficiency? What is the amount of total Pigouvian subsidy to achieve efficiency?
The supply and demand of sugar are given as Qs = 5P, Qd = 250- P where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar. Assuming that sugar is sold in a competitive market, What is the market price? How many tons of paper will be produced per year at that price? What is the efficient output of paper? What is the amount of total Pigouvian tax to achieve efficiency? What is the amount of total Pigouvian subsidy to achieve efficiency?
Chapter14: Environmental Economics
Section: Chapter Questions
Problem 11SQ
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supply and demand of sugar are given as
Qs = 5P, Qd = 250- P
where Qs is tons supplied per year, P is the price per ton; Qd is tons demanded per year. Because of the pollution associated with production, marginal external costs of 40 are associated with each ton of sugar. Assuming that sugar is sold in a competitive market,
- What is the market price? How many tons of paper will be produced per year at that price?
- What is the efficient output of paper?
- What is the amount of total Pigouvian tax to achieve efficiency?
- What is the amount of total Pigouvian subsidy to achieve efficiency?
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VIEWStep 3: Calculate the efficient output of paper
VIEWStep 4: Calculate the amount of Pigouvian tax to reach efficiency
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