Consider the following diagram showing monthly market demand for electricity, where t electricity is generated by burning
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Consider the following diagram showing monthly market demand for electricity, where t electricity is generated by burning coal. The mining, processing, and burning of coal have consider able environmental and health costs associated there not reflected in the market price for the fin-product—electricity. The diagram below shows the market demand for electricity and private margin costs of production.
b. What quantity of electricity will be produced and consumed in the absence of government intervention in this market? What will be the price?
c. What is the socially optimal price per kwh and quantity consumed of electricity? Explain.
d. Explain how a special tax might be used to get electricity-producing firms to produce the allocatively efficient level of output.
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Related Book For
Microeconomics
ISBN: 978-0321866349
14th canadian Edition
Authors: Christopher T.S. Ragan, Richard G Lipsey
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