Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Enterprise A is built on the edge of a lake and produces a product of A. As a result of the production of product A,

Enterprise A is built on the edge of a lake and produces a product of A. As a result of the production of product A, a pollutant is released into the lake, which can cause damage to the fishery production of the fishermen who raise fish in the lake. Assuming that every ton of product A produced will discharge one ton of sewage into the lake and cause a loss of 400 to the fishermen, the private and social marginal revenue curves of the enterprise are both P=2000-0.5Q, and the private marginal cost curve is P=0.3 Q-400. Based on the above information, complete the following questions:
(1) If no measures are taken to correct the external effects of company A's production, what will be the optimal quantity for company A to decide to produce product A? What is the market price of product A at this time?
(2) If the external effects of enterprise As production are corrected by taxation, and the amount of taxation per ton of product A is equal to the loss to the fishermen, what is the output of product A after taxation? What is the market price of product A at this time?
(3) What is the government's loss of efficiency due to pollution without a corrective tax? How much corrective tax can the government take to collect from product A?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Derivatives And Internal Models

Authors: H. Deutsch

4th Edition

1349307661, 9781349307661

More Books

Students also viewed these Finance questions

Question

Explain in brief the functions and functioning of stock exchanges.

Answered: 1 week ago