Calculate the market equilibrium quantity

Reference no: EM132198823

Question: 1. Suppose the demand for automobile tires in the US is: Qd=112-2.10P where Qd is quantity demanded in millions of tires and P is the price per tire.

A. If the private marginal cost (PMC) of producing tires is a constant $20, calculate the market equilibrium quantity.

B. Explain what a constant marginal cost implies. Does that mean the total opportunity cost of producing tires is unrelated to how many are
produced?

C. At the equilibrium, what is the private marginal benefit (PMB) of tires? Explain how, if tires have no consumption externalities, the PMB would equal the social marginal benefit.

D. The production of tires involves the processing of rubber. Let's assume the manufacturing process emits toxic fumes that affect those living around the manufacturing plants. The marginal damage (MD) of tire production is $10/tire. Calculate the socially efficient output of tires.

E. Calculate the total social cost and benefit of tire production at the efficient level. Calculate the net benefits to society of tire production.

F. Go back and calculate the net benefits to society at the market equilibrium calculated in part A. Explain why the market solution generates less net benefits to society than the efficient solution calculated in part D.

G. What is the dollar value of the deadweight loss generated by the market?

Reference no: EM132198823

Questions Cloud

Particularly international corporate-level strategies : What are some global environmental trends affecting the choice of international strategies, particularly international corporate-level strategies?

How can you reconcile the given with the equation : Consider an organization that turns land, labor and capital into outputs. It has a dozen employees, as well as tangible and intangible capital inputs.

Are lean concepts applicable in service industries : Are Lean concepts applicable in Service Industries (provide examples to support your position)?

Manufactured and sold carvings made on fossilized ivory : Ken was the owner of Scrimshaw, a company that manufactured and sold carvings made on fossilized ivory.

Calculate the market equilibrium quantity : Suppose the demand for automobile tires in the US is: Qd=112-2.10P where Qd is quantity demanded in millions of tires and P is the price per tire.

Determine how many cases of engine oil-oil change shop : An oil Change Shop is trying to determine how many cases of engine oil and oil change shop should order from its distributor.

Describe skillset requirements security professionals : Describe the impact globalization, terrorism, or technology has on the security industry worldwide. Identify skillset requirements security professionals.

High quality tailoring and fitting for men suits and tuxedos : Fifth Avenue Haberdashery and Apparel provides high quality tailoring and fitting for men’s suits and tuxedos.

Differences among customer relationship management : What are the differences among customer relationship management, supplier relationship management, and employee relationship management?

User Account

All Pages