Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

2. (8 points total) In this market the inverse demand is P = 63 - 3Q and the inverse supply is P = Q. However

image text in transcribed
2. (8 points total) In this market the inverse demand is P = 63 - 3Q and the inverse supply is P = Q. However there is an externality produced by production, this costs society EC (Q) = 70. (a) (1 point) If there is no government intervention, what will be the market price and quantity? (b) (points) What is the socially optimal price buyers pay and quantity in this market? (Hint: you can find this by having the producers act as if they are internalizing the cost of the externality.) (e) (points) Find a quota that will make the quantity sold the officient quantity, and also find a tax on producers that will do the same thing in this markoot. (d) ( points) Discuss the advantages and disadvantages of using a tax or quota in this market. You will need to consider the impact of the government having imperfect information. (e) (1 point) What is a third method they could use in this market? Discuss how it could be implemented and it's advantages and disad- vantages. 2. (8 points total) In this market the inverse demand is P = 63 - 3Q and the inverse supply is P = Q. However there is an externality produced by production, this costs society EC (Q) = 70. (a) (1 point) If there is no government intervention, what will be the market price and quantity? (b) (points) What is the socially optimal price buyers pay and quantity in this market? (Hint: you can find this by having the producers act as if they are internalizing the cost of the externality.) (e) (points) Find a quota that will make the quantity sold the officient quantity, and also find a tax on producers that will do the same thing in this markoot. (d) ( points) Discuss the advantages and disadvantages of using a tax or quota in this market. You will need to consider the impact of the government having imperfect information. (e) (1 point) What is a third method they could use in this market? Discuss how it could be implemented and it's advantages and disad- vantages

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

Financial Management Principles And Applications

Authors: Sheridan Titman

9th Edition

0655705457, 9780655705451

More Books

Students also viewed these Finance questions

Question

How has the Internet affected competitor intelligence gathering?

Answered: 1 week ago

Question

describe antecedents and consequences of quantitative job demands;

Answered: 1 week ago

Question

Relax your shoulders

Answered: 1 week ago