Calculate private market equilibrium, Macroeconomics

Consider the following Marginal Private Cost (MPC), Marginal Social Cost (MSC) and market demand curves. These curves relate to a market for a product, the production of which generates a negative externality. Use these equations to answer the questions from a) to e). In answering questions a) to e) make sure that you also use a fully labelled and explained diagram.

MPC = 10 + 10Q

MSC = 10 + 12 Q

P = 70 - 5Q

a. What is the private market equilibrium P and Q?

b. What is the socially efficient equilibrium P and Q?

c. Explain in words why the equilibrium in a) is not efficient. Explain in words why the equilibrium in b) is efficient.

d. Calculate the deadweight loss from the negative externality in this scenario.

e. What is the size of the Pigovian Tax required to produce the efficient equilibrium? How much revenue would the government collect if it imposes this tax?

f. Explain in words how a system of marketable permits differs from the Pigovian Tax as a way to correct for the inefficiency associated with the negative externality. Why do economists tend to prefer a system of marketable permits over the Pigovian Tax? There is no need to use a diagram in your answer to f). 

Posted Date: 2/27/2013 7:36:46 AM | Location : United States







Related Discussions:- Calculate private market equilibrium, Assignment Help, Ask Question on Calculate private market equilibrium, Get Answer, Expert's Help, Calculate private market equilibrium Discussions

Write discussion on Calculate private market equilibrium
Your posts are moderated
Related Questions
What are the Four different measures of GDP Using circular flow model we see that there are 4 equivalent techniques of measuring GDP: Using the definition: market value

If interest rates increase, which would you rather be holding, long term or short term bond? Why? Which type of bond has the greater interest rate risk?

Financing of Fiscal Deficit: Since the size of balanced budget of the multiplier is small, it is not for all time possible to get the needed demand expansion by raising the exp


project with introduction,aims and objectives,need and importance,preparation of data and information,case study,problems,conclusion

Collecteconomic data for three countries: Australia, China and Greece.The data is toobtainedfrom official sources as time series forthe key macroeconomic variables. These arereal G

outline two main restrictions by indian government applied to import. Using the data from your case study analyse and explain who would benefit directly and who would lose directly

The demand curve for product X is given by QXd = 340 - 4PX.\ a) How much consumer surplus do consumers receive when Px = $45? b) How much consumer surplus do consumers receiv

Q. Describe about Monetary policy? By monetary policy we mean policy directed at controlling the money supply and interest rates. In most nations, central bank is responsible f

difference between gdp at market price and nnp at factor cost