Answered: Suppose that we are considering the…

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter17: Externalities And The Environment

Section: Chapter Questions

Problem 10PAE

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Question

Suppose that we are considering the market for windmills. The private demand for electric cars is
given buy:

?d = 160 − 2?

And the private supply of electric cars is given by:

?s = ? − 20

Suppose also that electrci cars produce a positive externality, with a Marginal Economic Benefit of
$30 per unit.

5. What would be the private market equilibrium (p* & Q*)?

6. What is the socially optimal equilibrium (p* & Q*)?

7. What is Producer Surplus and Consumer Surplus in the private market equilibrium?

8. What is the increase in Total Surplus from moving from the private market equilibrium
to the socially optimal equilibrium?

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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