Calculate private market equilibrium, Macroeconomics

Assignment Help:

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). 


Related Discussions:- Calculate private market equilibrium

Economic-social-cultural and political-legal factors, For each of the host ...

For each of the host countries you have selected for examination (PEST-C analysis), conduct a preliminary assessment of the geographic, economic, social-cultural, and political-leg

Explain the competitive model, Identify and explain the evidence for and ag...

Identify and explain the evidence for and against the competitive model. Provide specific examples.

Solow model, Q1. The poorest countries in the world have a per capita incom...

Q1. The poorest countries in the world have a per capita income of about $600 today. We can reasonably assume that it is nearly impossible to live on an income below half this leve

Describe the economic justification for free trade policies, Some manufactu...

Some manufacturing and agricultural products produced in the Midwest are exported to overseas markets.  US consumers and businesses also purchase many products produced outside the

Particular public policy, Select a particular public policy with which you ...

Select a particular public policy with which you are familiar and discuss two positive and two negative aspects of that policy. b. What goal do you think the policy makers were try

natural monopoly, 1. Consider a natural monopoly. I. Show graphically a...

1. Consider a natural monopoly. I. Show graphically and discuss how price and quantity are set by the natural monopolist. II. Define the areas corresponding to the consumers'

Neo-classical theory of trade, explain the neo-classical theory of trade an...

explain the neo-classical theory of trade and show the difference between this and the classical approach, as wellas the similarities

Sons college education, On the day his son was born, a father decided to es...

On the day his son was born, a father decided to establish a fund for his son's college education. The father wants the son to be able to withdraw $4000 from the fund on his 18th b

Difference between project proposal and project feasibility , Project feasi...

Project feasibility study is needed to make a decision whether the project proposal is technically and economically possible. After finalization of the project feasibility report b

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd