Name: Anonymous 2007-11-02 1:29
ABC Company produces ODOURGONE, a popular room deodorizer. The production process emits sulfur dioxide into the atmosphere. The marginal private cost (MPC) of producing ODOURGONE is:
MPC = 1 Qs.
The marginal social cost is
MSC = 1.5 Qs
The demand curve for ODOURGONE is
P = 12- 0.5Qd.
Qs is the quantity of ODOURGONE supplied, P is the price of ODOURGONE in dollars and Qd is the quantity demanded.
(a) In an unregulated market, what is the equilibrium price and quantity of ODOURGONE?
(b) To be allocatively efficient, what should the price and quantity be?
(c) How does the unregulated price and quantity compare with the optimal price and quantity?
(d) If the government were to impose a tax on ODOURGONE, what should the tax be to reach the optimum?
MPC = 1 Qs.
The marginal social cost is
MSC = 1.5 Qs
The demand curve for ODOURGONE is
P = 12- 0.5Qd.
Qs is the quantity of ODOURGONE supplied, P is the price of ODOURGONE in dollars and Qd is the quantity demanded.
(a) In an unregulated market, what is the equilibrium price and quantity of ODOURGONE?
(b) To be allocatively efficient, what should the price and quantity be?
(c) How does the unregulated price and quantity compare with the optimal price and quantity?
(d) If the government were to impose a tax on ODOURGONE, what should the tax be to reach the optimum?