Economics Problems
The table below contains the supply and demand for concerts.
|
Price
|
Quantity supplied
|
Quantity demanded
|
|
10
|
0
|
12
|
|
14
|
1
|
11
|
|
18
|
2
|
10
|
|
22
|
3
|
9
|
|
26
|
4
|
8
|
|
30
|
5
|
7
|
|
34
|
6
|
6
|
|
38
|
7
|
5
|
|
42
|
8
|
4
|
|
46
|
9
|
3
|
|
50
|
10
|
2
|
|
54
|
11
|
1
|
|
58
|
12
|
0
|
The graph below contains graphs of the supply and demand curves.
1. Use the graph and table to determine the equilibrium price and quantity.
2. Suppose the noise created by each performance imposes a $16 external cost on nearby residents every time that a concert occurs. Add the social cost curve to the graph. Label it clearly.
3. What is the socially efficient quantity?
4. Shade the area in the graph that represents the deadweight loss created when the quantity traded equals the equilibrium quantity and not the socially efficient quantity.
5. Use the table to calculate the deadweight loss.
The table below contains the total and marginal costs two firms incur when they abate pollution. Each currently emits 10 tons of pollution. The government has decided that the optimal amount of pollution is only 12 tons. Therefore, it is going to implement a plan to abate pollution by 8 tons.
|
Firm A
|
|
Firm B
|
|
Tons abated
|
Total Cost ($)
|
Marginal Cost ($)
|
Tons abated
|
Total Cost ($)
|
Marginal Cost ($)
|
|
0
|
0
|
--
|
0
|
0
|
--
|
|
1
|
3
|
3
|
1
|
7
|
7
|
|
2
|
9
|
6
|
2
|
21
|
14
|
|
3
|
18
|
9
|
3
|
41
|
20
|
|
4
|
30
|
12
|
4
|
64
|
23
|
|
5
|
45
|
15
|
5
|
90
|
26
|
|
6
|
63
|
18
|
6
|
119
|
29
|
|
7
|
84
|
21
|
7
|
151
|
32
|
|
8
|
108
|
24
|
8
|
186
|
35
|
|
9
|
135
|
27
|
9
|
224
|
38
|
|
10
|
165
|
30
|
10
|
265
|
41
|
1. What is the total cost paid to reduce pollution from 20 to 12 if the government commands each firm to abate pollution by 4 tons?
2. What pollution tax would abate 8 tons of pollution?
3. How much pollution would each firm abate with the tax?
4. What is the total cost paid to reduce pollution from 20 to 12 if the government imposes the tax?
5. How much pollution would each firm abate if the government imposes a cap and trade program and gives Firm A 10 permits and Firm B 2 permits. Each permit allows a firm to emit 1 ton of pollution?
6. What is the total cost paid to reduce pollution from 20 to 12 under the cap and trade program?
7. How much pollution would each firm abate if the government imposes a cap and trade program and gives Firm A 2 permits and Firm B 10 permits. Each permit allows a firm to emit 1 ton of pollution?
What is the total cost paid to reduce pollution from 20 to 12 under this cap and trade program?