Ab 28; Economics please give me a clear and correct answer 3. The effect of negative externalities on the optimal quantity of consumptionConsider the market for pharmaceuticals. Suppose that a pharmaceutical factory dumps toxic waste into a nearby river, creating a negative externalityfor those living downstream from the factory. Producing additional pharmaceuticals imposes a constant per-unit external cost of $420. The followinggraph shows the demand (private value) curve and the supply (private cost) curve for pharmaceuticals.Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $420 per unit.12001000Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $420 per unit.PRICE (Dollars per unit of pharmaceuticals)12001080960840720600480360240120OOUO0 Supply(Private Cost)Demand(Private Value)Social CostD The market equilibrium quantity isunits of pharmaceuticals, but the socially optimal quantity of pharmaceuticals production isTo create an incentive for the firm to produce the socially optimal quantity of pharmaceuticals, the government could impose aper unit of pharmaceuticals.units.

Social cost refers to the cost suffered by society as a result of any specific economic activity or…

units of pharmaceuticals, but the socially optimal quantity of pH To create an incentive for the firm to produce the socially optimal quantity of pharmaceuticals, the government could impose a The market equilibrium quantity is

units of pharmaceuticals, but the socially optimal quantity of pH To create an incentive for the firm to produce the socially optimal quantity of pharmaceuticals, the government could impose a The market equilibrium quantity is

Economics For Today

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ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter14: Environmental Economics

Section: Chapter Questions

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Question

Ab 28;

Economics

please give me a clear and correct answer

3. The effect of negative externalities on the optimal quantity of consumption
Consider the market for pharmaceuticals. Suppose that a pharmaceutical factory dumps toxic waste into a nearby river, creating a negative externality
for those living downstream from the factory. Producing additional pharmaceuticals imposes a constant per-unit external cost of $420. The following
graph shows the demand (private value) curve and the supply (private cost) curve for pharmaceuticals.
Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $420 per unit.
1200
1000
Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $420 per unit.
PRICE (Dollars per unit of pharmaceuticals)
1200
1080
960
840
720
600
480
360
240
120
O
O
U
O
0 Supply
(Private Cost)
Demand
(Private Value)
Social Cost
D

The market equilibrium quantity is
units of pharmaceuticals, but the socially optimal quantity of pharmaceuticals production is
To create an incentive for the firm to produce the socially optimal quantity of pharmaceuticals, the government could impose a
per unit of pharmaceuticals.
units.

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