Find the corrective tax which eliminates the deadweight loss

Assignment Help Business Economics

Reference no: EM13981972

The aluminum industry faces a private marginal cost curve PMC = 2Q and a market inverse-demand curve of PD = 60 – QD. However, production creates an externality with marginal damages of MD = Q.

Graph the private marginal cost, the social marginal cost, the marginal damages, and the demand curve.

Find the market equilibrium without any government control and the associated deadweight loss.

Find the corrective tax which eliminates the deadweight loss, and find the efficient quantity produced.

What is the resulting price that consumers face with the corrective tax?

Reference no: EM13981972

Questions Cloud

Currency is deposited into a single bank : An economy starts with $10,000 in currency. All of this currency is deposited into a single bank. The required reserve ratio is 20 percent.

Short run and long-run effects of tightened monetary policy : Discuss the effects of a tightening monetary policy in the short-run and the long-run? What are the key assumptions in both scenarios? What are the appropriate models to distinguish the short run and long-run effects of a tightened monetary policy? W..

What is the sociological imagination : What is the sociological imagination? Discuss how your life might have turned out differently had you been born in a different time period (era) or location (country or culture)

Expenditures including the initial increase : Assume that the MPC is 0.89. If there was an $75 billion autonomous increase in expenditures, what would the total increase in expenditures including the initial increase?

Find the corrective tax which eliminates the deadweight loss : The aluminum industry faces a private marginal cost curve PMC = 2Q and a market inverse-demand curve of PD = 60 – QD. However, production creates an externality with marginal damages of MD = Q. Find the market equilibrium without any government contr..

Which of the following is the best definition of money : Which of the following is the best definition of money? 1) anything generally accepted as a payment for goods or repayment of debt 2) anything that is a liability of the federal government 3) anything that is a liability of a commercial bank 4) coins..

A year of unusually bad weather for agriculture would : A year of unusually bad weather for agriculture would:

According to a regression analysis : Since all the Hawkins Company's costs (other than advertising) are essentially fixed costs, managers want to maximize total revenue (net of advertising expenses). According to a regression analysis (based on 124 observations) carried out by managers,..

Educational reforms begin to significantly raise test scores : Educational reforms begin to significantly raise test scores of graduating high school seniors in the United States, and they enter the workforce with improved reading, math, and reasoning skills. What effect would this have on aggregate supply? Ques..

User Account

All Pages