What is the optimal output level

Reference no: EM132196751

Question: Consider the case of a positive consumption externality. Suppose throughout this exercise that demand and supply curves are linear, that demand curves are equal to marginal willingness to pay curves and that the additional social benefit from each consumption unit is 10 and is constant as consumption increases. This external benefit is currently not being internalized in the market. Demand and supply are given by: P = 100 âˆ' Q; P = 10 + Q

The Social Marginal Benefit curve is given by: SMB = 110 âˆ' Q

a) Given the supply curve, demand curve and social marginal benefit curve, what is the current number of units being produced by the market?

b) Is the current market level of production for this good socially optimal? If not, what is the optimal output level? Explain using a graph.

c) What is the value of consumer surplus, the value of producer surplus, and the value of the external benefits of the market level of production?

d) Calculate the deadweight loss produced by not internalizing this positive externality.

Reference no: EM132196751

Questions Cloud

A program to pass the command line arguments : Write a C++ program that prints out all of the command line arguments passed to the program.

Change should always be tested in the test environment : When configuring and testing a change in the environment, the change should always be tested in the "Test" environment.

What is the expenditure function : Preferences are modelled by an indirect utility function v(p1, p2, p3, y) = y p p1(p2 + p3) , where y denotes total breakfast spending and (p1, p2, p3).

Print out each command line argument on a separate line : Write a C program that will print out each command line argument on a separate line. However, you should print them out in reverse order.

What is the optimal output level : Is the current market level of production for this good socially optimal? If not, what is the optimal output level? Explain using a graph.

Write a c program for a mini calculator : Write a C program for a mini calculator using only the command line options. You must use getopt to parse the command line.

Consequences of overestimating verse underestimating demand : What are the consequences of overestimating verse underestimating demand?

Display the largest and second largest values : Write a C++ program that reads integers from a file on disk and then displays the largest and second largest values. You must use a C++ loop in this program.

Write a c program that uses splint and flags as many errors : Write a C program that uses splint and flags as many errors as possible from the list of all the errors shown : Dereferencing a possibly null pointer;

User Account

All Pages