Typical competitive market in equilibrium

Reference no: EM13686656

The graph shows a typical competitive market in equilibrium. Private costs and benefits are reflected in the supply and demand curves labeled D and S, respectively. The price is $50 and 40 units are sold each period. To illustrate the effects of an external benefit, click inside the box labeled External Benefit and enter a value. The curve labeled Dt illustrates the total benefit to society of each successive unit of the good – the private benefit plus the external benefit. To illustrate the effects of an external cost, click inside the box labeled External Cost and enter a value. The curve labeled St reflects the total marginal cost of the good –the external and the private cost. To simulate a government policy such as a tax or subsidy, drag either the demand curve or the supply curve in the appropriate direction to correct for the market failure, and then click on the New Equilibrium button to observe the market adjust to the policy. Click Reset to restore the initial values.

Presume production of this good imposes external costs of $10 for each unit produced. Does this cause an over or an under allocation of resources to production of this good? How might the government respond to correct this market failure?

Presume production of this good provides an external benefit of $10 for each unit produced. What is the efficient quantity in this market? How may the government respond to correct this market failure?

Reference no: EM13686656

Questions Cloud

How many pounds of potatoes will she purchase : Potatoes cost Janice $0.50 per pound and she has $6.00 that she could possibly spend on potatoes or other items. Presume she feels that the first pound of potatoes is worth $1.50, the second pound is worth $1.14, the third pound is worth $1.05, and a..

Demand for goods and services : Demand for goods and services (feed stocks) that go into final products (such as milk into ice cream) is

Some of the challenges facing women : What do you think are some of the challenges facing women and minority leaders today? Identify a contemporary or historical women or minority leader and describe how he or she overcame these challenges.

The headers and suggestion of the title : The headers and suggestion of the title

Typical competitive market in equilibrium : The graph shows a typical competitive market in equilibrium. Private costs and benefits are reflected in the supply and demand curves labeled D and S, respectively. The price is $50 and 40 units are sold each period. To illustrate the effects of an e..

Is this microeconomic or macroeconomic : Is this microeconomic or macroeconomic? "More workers are being hired by the nation's businesses." Comment on the statement from an opportunity cost perspective: "The main cost of going to college is the $15,000 per year in tuition." Suppose that a ..

Inefficient product market structures : Adolph Berle and Gardiner Means argued that widely held corporations will be run inefficiently by professional managers. Their argument is based on:

Explain where in the u.s. balance of payments : Summarize five arguments often used to justify trade restrictions, and describe some unintended consequences of protecting certain industries from international competition

What is the farmer estimate of yield in bushels/acre : What is the farmer's estimate of yield in bushels/acre?

User Account

All Pages