3. The graph below shows the marginal social cost (MSC), marginal private cost (MPC), marginal social...

 

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3. The graph below shows the marginal social cost (MSC), marginal private cost (MPC), marginal social benefit (MSB), demand (D), and marginal revenue (MR) curves for a monopoly, (a) Identify the monopolist's DIM AL Q,Q₂ Q₁, Q₁ MR MSC Q MPC D = MSB QUANTITY (i) profit-maximizing quantity (ii) profit-maximizing price (b) What information in the graph indicates that there is a negative externality? (c) Identify the socially optimal quantity. (d) In the case in which the government imposes a per-unit tax equal to the marginal external cost, identify each of the following. (i) The dollar value of the tax, using the price labels from the graph (ii) The profit-maximizing quantity associated with the tax (e) Given the monopoly facing the negative externality, would the deadweight loss increase, decrease, or stay the same as a result of imposing the per-unit tax? Explain. 3. The graph below shows the marginal social cost (MSC), marginal private cost (MPC), marginal social benefit (MSB), demand (D), and marginal revenue (MR) curves for a monopoly, (a) Identify the monopolist's DIM AL Q,Q₂ Q₁, Q₁ MR MSC Q MPC D = MSB QUANTITY (i) profit-maximizing quantity (ii) profit-maximizing price (b) What information in the graph indicates that there is a negative externality? (c) Identify the socially optimal quantity. (d) In the case in which the government imposes a per-unit tax equal to the marginal external cost, identify each of the following. (i) The dollar value of the tax, using the price labels from the graph (ii) The profit-maximizing quantity associated with the tax (e) Given the monopoly facing the negative externality, would the deadweight loss increase, decrease, or stay the same as a result of imposing the per-unit tax? Explain.

Answer rating: 100% (QA)

a i Profit Maximizing Quantity Q3 ii Profit Maximizing Price P4 b MSC is larger than M... View the full answer