The accompanying table shows the marginal benefits and costs of beer production and consumption per week: a.

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The accompanying table shows the marginal benefits and costs of beer production and consumption per week:

a. Based on these private costs and benefits, what will be the equilibrium price of a six-pack?

b. Based on these private costs and benefits, what will be the equilibrium quantity of six-packs sold per week?

c. Are there likely to be negative externalities associated with beer production and consumption? If so, describe some of them. If not, why not?

d. Is the equilibrium quantity of six-packs sold per week the socially optimal quantity? Why or why not? 

e. Suppose that an economist estimates that the negative externalities associated with beer production and consumption average $2.00 per six-pack of beer sold. She also concludes that there are no positive externalities associated with beer production and consumption. Based on the social marginal costs, what is the socially optimal price of a six-pack? What is the socially optimal quantity of six-packs sold per week?

f. Propose a method to get from the market equilibrium level of beer consumption to the socially optimal level of beer consumption.

Quantity Produced/ Consumed (# six-packs per week) 200 400 600 800 1000 Private Marginal Costs (supply) 5 6 7

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