Question
just asking for d-g please The demand for white paper in BC is: Qd=16-(1/6)P. Producers are willing to sell paper: Qs= (1/2)P-4. Unfortunately, wastewater from
just asking for d-g please
The demand for white paper in BC is: Qd=16-(1/6)P. Producers are willing to sell paper: Qs= (1/2)P-4. Unfortunately, wastewater from producing white paper causes damage to our fish population. The damage is estimated to be TD=16Q+2Q2. (Q is a ton of white paper landings)
d. From society's point of view, what is the optimal amount of paper production? At this optimal amount, what are the total social gains from trade (when we include the fish damage)?
The BC government has proposed three solutions to our problem:
Solution A: An optimal Pigou tax on white paper production
Solution B: The papermills are ordered to stop producing paper until they buy permission from fishing enthusiasts.
Solution C: Fishing enthusiasts are informed that if they want to save fish, they have to bargain with the papermills to get them to reduce their production of wastewater.
e. What is the optimal Pigou tax and how much revenue will this tax earn for the government?
f. Under Solution B, what is the maximum payment the papermills are willing to pay to fishing enthusiasts to allow some wastewater to injure fish? What is the minimum payment fishing enthusiasts will demand from the papermills in order for them to operate at the optimal level?
g. Under Solution C, what is the maximum payment fishing enthusiasts are willing to pay to get the papermills to reduce production? What is the minimum payment the fishing enthusiasts must receive to reduce production to the optimal level?
(part a to d if u need)
a. What is the market equilibrium price and quantity of landings IF consumers and producers ignore the damage caused by paper production?
b. How much consumer surplus and producer surplus do consumers and producers think they have (when they ignore the fish damage)? What are the total private gains from trade at this quantity?
c. At the equilibrium quantity (#a above), what is the damage (in $) caused to the fish? What are the total social gains from trade at the market equilibrium (when we include the fish damage)?
d. From society's point of view, what is the optimal amount of paper production? At this optimal amount, what are the total social gains from trade (when we include the fish damage)?
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