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

What are the macroeconomic variables, Macroeconomics usually deals with the...

Macroeconomics usually deals with the behaviour of aggregates of economic variables. An economic variable is a magnitude whose value may changes. Important variables in macroeconom

Branches and development of macroeconomics, compare and contrast the moneta...

compare and contrast the monetarism economics and the keynesian economics

Relate central banks with commercial banks, Relate central banks with comme...

Relate central banks with commercial banks In many countries, the central bank imposes reserve requirements. This means that commercial banks are obliged to hold a certain perc

National income statistics, briefly explain any five uses of national incom...

briefly explain any five uses of national income statistics

#title. phillip curve, what does phillip curve signify? how do you reconcil...

what does phillip curve signify? how do you reconcile the difference in the shap of the curve in the short run and the long run?

National income, difference between gdp at market price and nnp at factor c...

difference between gdp at market price and nnp at factor cost

Feds actions on gdp impact, Suppose the banking system has reserves of $750...

Suppose the banking system has reserves of $750,000, demand deposits of $2,500,000 and a reserve requirement of 20%. a) If the Fed now purchases $125,000 worth of government bon

Cost reduction, Cost Reduction Positive measures to effect a lowering o...

Cost Reduction Positive measures to effect a lowering of costs include:  reducing national insurance contributions (an  ad valorem  tax on employing labor);

Wages, what is a wage? and the difference between real and nominal wages gi...

what is a wage? and the difference between real and nominal wages giving examples?

Factors affecting the price elasticity of demand, Q. Discuss about the fact...

Q. Discuss about the factors affecting the Price Elasticity of Demand. a. Availability of Substitute- Availability of close substitute is important determinants of elasticity of

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