Externalities - This problem is matching learning objectives of chapter 10 section 10.1 private cost, external cost, social cost, and government action.
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Quantity (tons of paper)
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Marginal Private cost (dollars)
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Marginal External cost (dollars)
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Marginal social cost (dollars)
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|
100
|
10
|
5
|
?
|
|
200
|
20
|
10
|
?
|
|
300
|
30
|
15
|
?
|
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400
|
40
|
20
|
?
|
|
500
|
50
|
25
|
?
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1. The table above gives the private costs and external costs of producing paper.
a. Give some examples of private costs of producing paper, and give an example of the external cost of producing paper.
b. Complete the table by finding the marginal social cost at each level of production. Describe how you find the marginal social cost.
c. If the market is competitive and is left unregulated and 400 tons of papers are produced, what is the price of a ton of paper? Explain your answer.
d. If the government imposes a tax equal to the external cost at each level of production, what is the amount of tax would be charged if 400 tons are produced? How much is the price of a ton of paper after the tax? Explain your answer.