What is the industrys marginal external cost function

Reference no: EM13699497

A perfectly competitive industry has an inverse demand for its output given by p Q =? 100, and its supply function is given by MC Q = + 30. The process of making Q also generates pollution, g, in the amount g Q = ? 0.5, and the total external cost of g to society is 2 EC g =? 3.

a) What is the industry’s marginal external cost function?

b) If the industry chooses its output level ignoring the marginal external costs, how much output will there be?

c) What is the socially optimal level of output?

d) If you were to design a unit tax on output to achieve the socially optimal output level, how big would this tax be?

Reference no: EM13699497

Questions Cloud

Quality became most important issue facing american business : Explain why quality became the most important issue facing American business in the 1980s. In addition to economic competition from Japan, what other factors may have contributed to the importance that quality has assumed?

Identify a market which you feel is perfectly competitive : Identify a market which you feel is perfectly competitive. The firms in this structure are considered price takers, are the firms in the market you chose all selling their product at the same price? Why or why not?

Differences between accounting profit and economic profit : Discuss the differences between accounting profit and economic profit. What does it mean when a company makes zero accounting profit? How about zero economic profit?

Identify instance where price control is used in our markets : Identify an instance where a price control is used in our markets. Why do you think this price control exists? Also discuss the possible negative effects it may have on the market

What is the industrys marginal external cost function : A perfectly competitive industry has an inverse demand for its output given by p Q =? 100, and its supply function is given by MC Q = + 30. The process of making Q also generates pollution, g, in the amount g Q = ? 0.5, and the total external cost of..

Calculate the profit-maximizing price : A pharmaceutical firm has a monopoly on a new class of vasodilator. The market demand is given by P=240-0.01*Q, and thus MR=240-0.02*Q. The monopolist's marginal cost is constant and equal to 20. Calculate the profit-maximizing price.

Total surplus of the market with the price ceiling : A market has a demand curve described by P=30-Q, a supply curve described by P=16+Q, and a price ceiling of 20. Calculate the Total Surplus of the market with the price ceiling?

Calculate the profit-maximizing production quantity : A firm has a monopoly on a new type of gaming console. The market demand is given by P=175.3-0.003*Q and thus marginal revenue is MR=175.3-0.006*Q. The monopolist's marginal cost is MC=5.2+0.001*Q. Calculate the profit-maximizing production quantity.

Discuss achievements and failures of each of these rounds : In the last half-century there have been three additional rounds of GATT/WTO negotiations. Discuss the achievements and failures of each of these rounds, and summarize.

User Account

All Pages