What is the dollar value of the deadweight loss

Assignment Help Microeconomics
Reference no: EM132196957

Question: Suppose the demand for automobile tires in the US is: Qd=112-2.10P where Qd is quantity demanded in millions of tires and P is the price per tire.

1. If the private marginal cost (PMC) of producing tires is a constant $20, calculate the market equilibrium quantity.

2. Explain what a constant marginal cost implies. Does that mean the total opportunity cost of producing tires is unrelated to how many are produced?

3. At the equilibrium, what is the private marginal benefit (PMB) of tires? Explain how, if tires have no consumption externalities, the PMB would equal the social marginal benefit.

4. The production of tires involves the processing of rubber. Let's assume the manufacturing process emits toxic fumes that affect those living around the manufacturing plants. The marginal damage (MD) of tire production is $10/tire. Calculate the socially efficient output of tires.

5. Calculate the total social cost and benefit of tire production at the efficient level. Calculate the net benefits to society of tire production.

6. Go back and calculate the net benefits to society at the market equilibrium calculated in part A. Explain why the market solution generates less net benefits to society than the efficient solution calculated in part D.

7. What is the dollar value of the deadweight loss generated by the market?

Reference no: EM132196957

Questions Cloud

What is the elasticity of demand for paul newspapers : Paul owns the only newsstand in town. All the townspeople buy from him and love to come by and talk for a while. They enjoy it so much that if Paul doubles.
How can alter purchases of hamburger and steak : Illustrate mathematically and graphically whether or not Bob is maximizing his utility with respect to steak and hamburgers.
Briefly explain the economic principles : The principles of economics give how individuals make decisions and how people interact with one another and how the economy functions.
How do economic incentives affect individuals behavior : How do economic incentives affect individuals' behavior with respect to the environment, such as decisions to buy a car?
What is the dollar value of the deadweight loss : Suppose the demand for automobile tires in the US is: Qd=112-2.10P where Qd is quantity demanded in millions of tires and P is the price per tire.
What actions should you take in given question : You are the CFO of a U.S. firm whose wholly owned subsidiary in Mexico manufactures component parts for your U.S. assembly operations.
How much revenue would barbados make : How much revenue would Barbados make from taxing Rihanna? What is the deadweight loss from Barbados taxing Rihanna's earned income?
Draw the initial budget constraint and label it : On the graph, draw the initial budget constraint and label it BCA. Next, label the point at which this person will consume as A.
Post news stories related to global business : Please post at least three news stories related to Global Business with a short summary and the Reference source link. News stories from the list below.

Reviews

Write a Review

 

Microeconomics Questions & Answers

  Examine the roles of the principal in helping consumers

Imagine a situation where consumers have incomplete information about their health status and about the productivity of medical care.

  Explain john maynard keynes contribution to theories of

describe john maynard keynes contribution to the theories of macroeconomics. why was he such an important economist?

  What is the short-run elasticity of this firms labor demand

The firm has 15 machines in place and the wage rate rises from $10 per hour to $20 per hour. What is the short-run elasticity of this firm's labor demand?

  What is the equation that describes the is curve

Assume an economy is described by the following economic parameters: What is the equation that describes the IS curve?

  Are you a classical or keynesian economist

Are you a Classical or Keynesian economist? Pick a perspective and defend. The response must be typed, single spaced.

  What was the motivation behind the transaction

Describe the merger you researched. What was the motivation behind the transaction? Were the companies in the same industry? Geography?

  Question about micro economics

Question about micro economics- Sam Smith owns an internet radio company that has subscribers in Houston and Dallas

  Why is this a sensible proxy variable for poverty

The variable lnchprg is the percentage of students eligible for the federally funded school lunch program. Why is this a sensible proxy variable for poverty?

  John in exchange for her burger

Of of the prices which is the lowest she would accept from John in exchange for her burger?

  New business in exchange for ownership interest

Persons or organizations that agree to provide some funds for a new business in exchange for ownership interest or stock are called

  Consumers maximum willingness to pay for a good

Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 ..

  What is an order of-magnitude estimate for expanded plant

New EPA regulations have just been proposed. If they are enacted, the capacity of the hydrogen sulfide removal plant that is part of a coal facility.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd