What is the profit maximizing quantity of the good for the industry (Q1) when it is not forced to consider the externality?
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Problem 2Ai: What is the profit-maximizing quantity of the good for the industry (Q1) when it is not forced to consider the externality? The profit-maximizing quantity for the industry (Q1) is: Problem 2Aii: What is the profit-maximizing quantity of the good for the representative individual firm (q1) when it is not forced to consider the externality? The profit-maximizing quantity for the representative individual firm (q1) is: Problem 2Bi: What is the equilibrium price (P1) in the aggregate market when the industry is not forced to consider the externality? Problem 2Bii: Calculate the consumer surplus when the industry is not forced to consider the externality. Problem 2Biii: Calculate the producer surplus when the industry is not forced to consider the externality. Problem 2Biv: Calculate the total damage cost when the industry is not forced to consider the externality. Problem 2Bv: What is the total surplus less the damage cost when the industry is not forced to consider the externality? Suppose the government wants the firms in the industry to internalize the negative externality by imposing a Pigouvian tax: Problem 2Ci: What should the government set the tax rate as when they impose a Pigouvian tax? Problem 2Cii: What is the new equilibrium price (P2) in the aggregate market after the government imposes a Pigouvian tax? Problem 2Cii: What is the new equilibrium quantity (Q2) in the aggregate market after the government imposes a Pigouvian tax? Problem 2Ciii: What will the new equilibrium quantity (q2) be for the representative individual firm after the government imposes a Pigouvian tax? Problem 2Civ: Calculate the new consumer surplus after the government imposes a Pigouvian tax. Problem 2Cv: Calculate the new producer surplus after the government imposes a Pigouvian tax. Problem 2Cvi: Calculate the new total damage cost after the government imposes a Pigouvian tax. Problem 2Cvii: Calculate the total tax revenue after the government imposes a Pigouvian tax. Problem 2Cviii: What is the sum of the total surplus and tax revenue less the total damage cost after the government imposes a Pigouvian tax?
Akash M.
Comprehension: Assume that there are 2 firms producing steel. There is a negative externality due to production causing pollution. Firm 1's output is q1 and firm 2's is q2. Assume that the market price for steel is Ps=1. Now consider two scenarios : Scenario 1 : Assume that firm 1's cost function is C1(q1) = q1^2 and firm 2's cost function is C2 (q2, q1) = (q2 + 0.75 q1)^2. In short, firm 1's production is not affected by firm 2 but firm 2's production is affected by firm 1, i.e., Firms 1's operation causes firm 2's costs to rise. Scenario 2 : Assume that negative externality works both ways i.e. both the firms face the adverse impact. So assume C1(q1, q2) = (q1 + 0.75 q2)^2 and C2(q1, q2) = (q2 + 0.75 q1)^2, i.e., Firms 1's operation causes firm 2's costs to rise and vice versa. Q.141 What is the equilibrium profit of firm 2 (̃̀2) in the short run, in Scenario 1 ? (1) ̃̀2 = 0.025 (2) ̃̀2 = 0.125 (3) ̃̀2 = -0.125 (4) ̃̀2 = 0.75
Rashmi S.
Suppose that in the market for paper, demand is p = 100 - Q. The private marginal cost is MCP = 10 + Q. Pollution generated during the production process creates external marginal harm equal to MC = Q. Is social welfare greater under monopoly or under competition?
Niamat K.
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