What is the socially optimal level of output
Course:- Microeconomics
Reference No.:- EM13700121

Assignment Help
Assignment Help >> Microeconomics

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?

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Microeconomics) Materials
Suppose a monopolist operated in an industry where the market demand is perfectly elastic (with inverse demand given by P = 30 and its cost function is T C = 100 + Q + Q^2 . c
Determine the nature of the technological change, and explain how the change either increased outputs (positive technological change) or decreased outputs (negative technolo
1.Flank defense: protecting a weak flack by erecting outposts 2.Contraction defense: giving up weaker territories and reassigning resources to stringer territories. what's the
Are there any externalities associated with this good Explain whether the private market should provide this good or the government should provide this good. Explain in term
Why does the economic transfer price to the consumer include implicit cost (normal profits, externalitiea, and other unrecorded cost) which you do not find in accounting cos
Suppose the autonomous planned spending increases by 800 billion so that A?p = 5,800. Explain if this increase is the result of increases will
A firm's current profits are $750,000. These profits are expected to grow indefinitely at a constant annual rate of 5 percent. If the firm's opportunity cost of funds is 8.5 p
Describe two ways in which financial intermediaries help lower transaction costs in an economy. How can asymmetric information problems lead to a bank panic? How does the free