Calculate deadweight loss associated with the externality

Assignment Help Business Economics

Reference no: EM131242551

Suppose that demand for a product is Q=140-6P and supply is Q=2P-20. Furthermore, suppose that the marginal external damage of consuming this product is $4 per unit.

Does it result in under-consumption? Or over-consumption? How many more or less units of this product will the free market produce than is socially optimal? Calculate the deadweight loss associated with the externality.

Reference no: EM131242551

Questions Cloud

You were responsible for yourself-your individual results : Consider the following scenario: You have just been promoted to supervise a team of employees. In your previous role, you were responsible for yourself and your individual results. Now you will be in charge of a team of five employees. As a brand new..

Define marginal product of labor : Trans-Fat Corp. is setting up a small Twonky factory in Albany. Table 1 shows the hourly output in Twonkies associated with each level of employment. Define marginal product of labor. Explain why diminishing marginal productivity in an input occurs. ..

The marginal damage averted from poolution cleanup : The marginal damage averted from poolution cleanup is MD=200-5Q. The marginal cost associated with pollution cleanup is MC=25+2Q. What is the optimal level of pollution reduction? Show that this level of pollution reduction could be accomplished thro..

Using neo-classical model of labor-leisure : Using neo-classical model of labor-leisure choice to answer the following questions. How does an increase in wage rate change the optimal consumption-leisure combination chosen by the worker? State income effect and substitution effect.

Calculate deadweight loss associated with the externality : Suppose that demand for a product is Q=140-6P and supply is Q=2P-20. Furthermore, suppose that the marginal external damage of consuming this product is $4 per unit. Does it result in under-consumption? Or over-consumption? How many more or less unit..

What is the optimal level of pollution reduction : The marginal damage averted from pollution cleanup is MD = 200 − 5Q. The marginal cost associated with pollution cleanup is MC = 25 + 2Q. What is the optimal level of pollution reduction ? Show that this level of pollution reduction could be accompli..

Write down equation for market demand for hamburgers : Bill’s demand for hamburgers (a private good) is Q = 21 − 6P and Ted’s demand is Q = 6 − 3P. Write down an equation for market demand for hamburgers. Now suppose that hamburgers are a public good. Write down an equation for the social marginal benefi..

What is socially optimal level of firms pollution reduction : Two firms are ordered by the federal government to reduce their pollution levels. Firm A’s marginal costs associated with pollution reduction is MC = 150 + 3Q. Firm B’s marginal costs associated with pollution reduction is MC = 9Q. The marginal benef..

Some strong opposition from several high-ranking politicians : Prior to its establishment in 1994, NAFTA had some strong opposition from several high-ranking politicians - many of whom feared the loss of American jobs to Mexico where it is much cheaper to hire workers. What are the strengths and weaknesses of su..

User Account

All Pages