What is total surplus from market after taking into account

Reference no: EM132192549

Question: The market for a particular chemical, called Negext, is described by the following equations

Demand: Qd=100-5P

Supply:Qs=5P

where Q is measured as units of Negext and P is price in dollars per unit.

b. for each unit of negext produced, 4 units of pollution are emitted, and each unit of pollution imposes a cost on society of$1. Compute the total cost of pollution when the market of Negextis in equilibrium. what is total surplus from this market after taking into account the cost of pollution?

c. Would banning Negext increase of decrease welfare?why?

d. suppose that the government restrict emission to 100 units ofpollution. Graph the Negext market under this contraint. find the new equilibrium price and quantity and show them on your graph.compute how this policy affects consumer surplus, producer surplusand the cost of pollution. Would you recommend this policy?why?

e. suppose that instead of restricting pollution, the government imposes a tax on producers equal to $4 for each unit of chemical produced. calculate the new equilibrium price and quantity, as well as consumer surplus, producer surplus, tax revenue, and the cost of pollution. what is total surplus now?

f. new research finds the social cost of pollution is really higher than $1. how would that change the optimal policy response? is there some cost of pollution that would make it sensible to ban Negext? if so, what is it?

Reference no: EM132192549

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