Suppose that leather is sold in a perfectly competitive industry. The industry short-run supply curve (marginal cost curve) is P = MC = 3Q, where Q is measured in millions of hides per year. The inverse demand for leather hides is given by P = 60-7Q. a. Find the equilibrium market price and quantity sold. b. Suppose that the leather tanning releases chromium and other pollutants into local waterways. The external marginal cost is estimated to be $4 for each hide produced. Calculate the socially optimal level of output and price for the tanning industry.

Suppose that leather is sold in a perfectly competitive industry. The industry short-run supply curve (marginal cost curve) is P = MC = 3Q, where Q is measured in millions of hides per year. The inverse demand for leather hides is given by P = 60-7Q. a. Find the equilibrium market price and quantity sold. b. Suppose that the leather tanning releases chromium and other pollutants into local waterways. The external marginal cost is estimated to be $4 for each hide produced. Calculate the socially optimal level of output and price for the tanning industry.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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