Question
Suppose the market demand for a good takes the form: 1 Q=120- D 4 P and market supply takes the form: 1 O=30+-P 2
Suppose the market demand for a good takes the form: 1 Q=120- D 4 P and market supply takes the form: 1 O=30+-P 2 and production of each unit causes $30 in (external) damage. What is the total surplus in this market if a policy is passed that effectively "internalizes" the externality? (Note: with external damages the overall benefit from a market is often referred to as "social welfare" instead of total surplus. Regardless, to answer this question subtract total external damages from tax revenue, consumer surplus, and producer surplus)
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Intermediate Microeconomics
Authors: Hal R. Varian
9th edition
978-0393123975, 393123979, 393123960, 978-0393919677, 393919676, 978-0393123968
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