How much will the unregulated market produce

Assignment Help Microeconomics

Reference no: EM133843446

Question 1:

You work for the Environmental Protection Agency - the government wants to regulate air emission from cement production.

Suppose that the cement industry is perfectly competitive.

Demand is given by: P=400-Q

Supply (MPC) is given by: P=40+Q

Marginal External Costs are given by: P =1 Q

(a) How much will the unregulated market produce?

(b) What is the socially-optimal (i.e., welfare-maximizing) price and quantity?

(d) What is the Pigouvian tax that will correct the externality? Draw a diagram illustrating the solutions to (a), (b), (¢c) and how the Pigouvian tax shifts the marginal private cost curve.

(e) Now suppose that instead of the industry being perfectly competitive, the good is supplied by a monopoly. How much will the monopoly produce?

(f) Draw the diagram illustrating the (a) monopoly price and quantity, (b) socially-optimal price and quantity, and (c) the deadweight loss associated with the unregulated monopoly.

(g) Briefly explain whether it still makes sense to use a Pigouvian tax in this setting to correct the externality if a monopoly provides the good.

Reference no: EM133843446

Questions Cloud

Effects of energy and economic policy on a global level : The video "This Changes Everything" explored the effects of energy and economic policy on a global level.

What will be the whole market output : How much will each firm produce? What will be the whole market output? How many firms will there be?

Why do you think the government would do such action : How does an increase in interest rate affect your particular industry? And why do you think the government would do such action?

Concept of the circular economy : In this final Yellowdig for module 7, I wanted to delve a little deeper into the concept of the circular economy.

How much will the unregulated market produce : How much will the unregulated market produce? What is the socially-optimal (i.e., welfare-maximizing) price and quantity?

Difference between domestic-international working capital : Financial managers need to consider the difference between domestic and international working capital.

How will they help you in your future career and life : Of everything we learned in class, why did you choose those three? How will they help you in your future career and life?

What implications do see you for us and the global economy : What implications do see you for the U.S. and the global economy and trade between these two consortiums, China's "Belt and Road Initiative" and "IMEC"?

Discuss some of subsaharan africa assets : Why could Africa be considered one of the richest continents on Earth? Discuss some of Subsaharan Africa's assets.

User Account

All Pages