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a. Draw the MSB and MSC curves on the graph below, assuming that the external benefits are estimated at $40 per unit and the external cost at $20 per unit. Plot only the endpoints of the both curves and position those points on the edges of the graphing area. MPC

a. Draw the MSB and MSC curves on the graph below, assuming that the external benefits are estimated at $40 per unit and the external cost at $20 per unit. Plot only the endpoints of the both curves and position those points on the edges of the graphing area. MPC

Economics (MindTap Course List)
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
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a. Draw the MSB and MSC curves on the graph below, assuming that the external benefits are estimated at $40 per unit and the external cost at $20 per unit. Plot only the endpoints of the both curves and position those points on the edges of the graphing area. MPC MPB 100 Tools 90 80 MSB MSC 70 60 50 40 30 20 10 369 1215 1821 24 27 30 33 36 39 42 45 Quantity per period b. What are the most desirable price and quantity from society's point of view? Price: $ Quantity: c. If government wanted to increase the quantity to the amount in (b) above, what subsidy would it need to give to producers per unit? Value of subsidy: $ d. if, instead, government wanted to increase the quantity to the amount in (b) above, what subsidy would it need to give to consumers per unit? Value of subsidy: $ Price
Transcribed Image Text:a. Draw the MSB and MSC curves on the graph below, assuming that the external benefits are estimated at $40 per unit and the external cost at $20 per unit. Plot only the endpoints of the both curves and position those points on the edges of the graphing area. MPC MPB 100 Tools 90 80 MSB MSC 70 60 50 40 30 20 10 369 1215 1821 24 27 30 33 36 39 42 45 Quantity per period b. What are the most desirable price and quantity from society's point of view? Price: $ Quantity: c. If government wanted to increase the quantity to the amount in (b) above, what subsidy would it need to give to producers per unit? Value of subsidy: $ d. if, instead, government wanted to increase the quantity to the amount in (b) above, what subsidy would it need to give to consumers per unit? Value of subsidy: $ Price
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