The public smoking of cigarettes generates costs to society from second-hand smoke, therefore, cigarette production imposes costs on people who do not smoke. Moreover, private consumption of cigarettes can start apartment building and wild fires that also impose costs on non-smokers. Luckily, fire extinguishers can help prevent the spread of fires. Suppose that the government can institute either a tax on cigarette producers, or a subsidy to cigarette producers, to bring the private production costs in line with social costs. Identify where the socially optimal equilibrium would be.
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The public smoking of cigarettes generates costs to society from second-hand smoke, therefore, cigarette production imposes costs on people who do not smoke. Moreover, private consumption of cigarettes can start apartment building and wild fires that also impose costs on non-smokers. Luckily, fire extinguishers can help prevent the spread of fires.
Suppose that the government can institute either a tax on cigarette producers, or a subsidy to cigarette producers, to bring the private production costs in line with
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- Assume that each gallon of gas consumed creates extra costs for the citizens of Iola in the form of congestion, noise, and pollution. Researchers from Allen Community College have estimated that the Marginal Social Cost of the consumption of gasoline is described by the following equation: Marginal Social Cost: P = 1 + 2 Q Graph the market. Be sure to fully and clearly label the graph, including: the Demand (D), the Marginal Private Cost (MPC), the Marginal Social Cost (MSC), the Private Equilibrium Quantity (Qpe), Private Equilibrium Price as (Ppe), the Socially Optimal Price (Ps), the Socially Optimal Quantity (Qs), and the Deadweight Loss (DWL).Assume the Senator asks you of the optimal policy to combat CO2 emissions (carbon emissions). The senator is interested in implementing a policy that will reduce emissions from the power sector. The demand for electricity is P = 20 - 2 x Q where Q is amount of electricity demanded, and P is the price of electricity in MWh. The marginal cost of producing electricity is MC = 2 x Q And the damage caused by pollution is MEC = Qwhat is the pigouvian taxThe graph shows the private supply and demand curves for spaceships in Spacelandia. The craft are quite popular, but unfortunately produce pollutants as a by-product when Spacelandians fly about. Suppose the government of Spacelandia places a per unit tax on the production of spaceships equal to the marginal damage cost (MDC). Demonstrate the effect of the tax by shifting the appropriate curve or curves. Supply Demand Quantity Price
- The public smoking of cigarettes generates costs to society from second-hand smoke, therefore, cigarette production imposes costs on people who do not smoke. Moreover, private consumption of cigarettes can start apartment building and wild fires that also impose costs on non-smokers. Luckily, fire extinguishers can help prevent the spread of fires. Suppose that the government can institute either a tax on cigarette producers, or a subsidy to cigarette producers, to bring the private production costs in line with social costs. Identify where the socially optimal equilibrium would be. 0 \D" Sm S 8"The figure below shows the market for driver education programs. The market demand curve for driver education reflects only the marginal private benefit (MPB) that individual drivers receive from the programs. Since this is a market with positive externalities, suppose the government provides a subsidy for driver education programs that is equal to the marginal social benefit (MSB) minus the marginal private benefit (MPB), in this case, $20 per driver. With the subsidy, the demand curve will shift and become the same as the marginal social benefit (MSB) curve. Move the demand curve below to illustrate this shift. Be sure to take the exact size of the subsidy into account. Precise answers are required. Also, make sure to position the point Social equilibrium correctly. Provide your answer below: 65 S (MPC) -50- -45 -40 35 30 Market Equilibrium (150,30) Social Equilibrium (150 30) 25 20- 15- 10- -5 D(MPB) -50 50 100 150 200 250 300 350 400 450 500 -5 Quantity of driver education programs…In 1998, California became the first state to adopt rules requiring many sport utility vehicles, pickups, and minivans to meet the same pollution standards as regular cars, effective in 2004. As the deadline drew near, a business group (which may have an incentive to exaggerate) estimated that using the new technology to reduce pollution would increase vehicle prices by as much as $7,000. A spokesperson for the California Air Resources Board, which imposed the mandate, said that the additional materials cost was only about $70 to $270 per vehicle. Suppose that the two major producers are Toyota and Ford, and these firms were price setters with differentiated products. Show the effect of the new regulation. Is it possible that the price for these vehicles would rise by substantially more than the marginal cost would? Explain your answer.
- Suppose that a vaccine is developed for a highly contagious strain of flu. The likelihood that anyone will get this flu decreases as more people receive the vaccine. One of the demand curves below represents the private demand for the vaccine and the other represents the social demand for the vaccine. 110 T 100 90 80 70 Price ($/dose) IN WAS ON 10 0 30 20 60 50 40 0 25 ' S D1 D2 50 75 100 125 150 175 200 225 250 Quantity (doses/day) The total social benefit of 75 doses is:The production of plastic creates pollution, which, in sufficient quantities, can harm people's health. Assume that the plastic industry is perfectly competitive. We know that the industry will produce more output than is socially optimal, since firms do not bear the costs of pollution (that is, pollution is a negative externality). Without government intervention, the market output will be 50 million units at a price of $10, where $10 is the minimum AC of firms in the industry. This cost is the long-run marginal private cost (MPC) of making plastic. The marginal social cost (MISC) of plastic is $15 at this level of output; the MSC includes the external social cost of pollution. Since MSC exceeds price, output is too high. The socially optimal output is 30 million units at a price of $13. This output can be attained by levying an excise tax of $3 on each unit of plastic. Assume that the demand and marginal social cost (MSC) curves are linear, as shown in the graph a. The government…The production of plastic creates pollution, which, in sufficient quantities, can harm people’s health. Assume that the plastic industry is perfectly competitive. We know that the industry will produce more output than is socially optimal, since firms do not bear the costs of pollution (that is, pollution is a negative externality). Without government intervention, the market output will be 50 million units at a price of $10, where $10 is the minimum AC of firms in the industry. This cost is the long-run marginal private cost (MPC) of making plastic. The marginal social cost (MSC) of plastic is $15 at this level of output; the MSC includes the external social cost of pollution. Since MSC exceeds price, output is too high. The socially optimal output is 30 million units at a price of $13. This output can be attained by levying an excise tax of $3 on each unit of plastic. Assume that the demand and marginal social cost (MSC) curves are linear, as shown in the graph below. (a) Calculate…
- The production of plastic creates pollution, which, in sufficient quantities, can harm people's health. Assume that the plastic industry is perfectly competitive. We know that the industry will produce more output than is socially optimal, since firms do not bear the costs of pollution (that is, pollution is a negative externality). Without government intervention, the market output will be 50 million units at a price of $10, where $10 is the minimum AC of firms in the industry. This cost is the long-run marginal private cost (MPC) of making plastic. The marginal social cost (MISC) of plastic is $15 at this level of output; the MSC includes the external social cost of pollution. Since MSC exceeds price, output is too high. The socially optimal output is 30 million units at a price of $13. This output can be attained by levying an excise tax of $3 on each unit of plastic. Assume that the demand and marginal social cost (MSC) curves are linear, as shown in the graph below. (a) Calculate…A government study has concluded that the marginal benefits from controlling cow-induced methane production are given by MB = 100 – R where R represents the percentage reduction from unregulated levels. The marginal cost to farmers of methane reduction (through better cow feed) is given by MC = 20 + R a) What is the socially optimal level of methane reduction? [Hint: Let MB=MC] b) If the government were to adopt a methane fee that farmers must pay for each percent of methane they do not reduce, how should this fee be set to achieve the optimal level of R? {Hint: This fee will be reflected in the MC to the firm] c) Suppose there are two farmers in this market with differing costs of methane reduction. The first has marginal costs given by MC1 = 20 + 2/3 R1 whereas the second has marginal costs given by MC2 = 20 +2R2 Total methane reduction is the average from these two farms. If the government mandates that each farm reduce methane by the optimal percentage calculated in part a), what…Marginal Social Cost: P = 1 + 2 Q Graph the market. Be sure to fully and clearly label the graph, including: the Demand (D), the Marginal Private Cost (MPC), the Marginal Social Cost (MSC), the Private Equilibrium Quantity (Qpe), Private Equilibrium Price as (Ppe), the Socially Optimal Price (Ps), the Socially Optimal Quantity (Qs), and the Deadweight Loss (DWL).