Brazilian-imported beef has a marginal benefits curve of MBp(q) = 100 −q, and a marginal cost curve of MCp(q) = 40 + q. Cattle farming is responsible for approximately 80% of the deforestation in the Brazilian Amazon, which hosts incredible biodiversity and a third of the world’s remaining rainforests. Suppose this externality could be captured by the following marginal externality cost:
MCe(q) = 30 + 0.5q.
(a) Graph the private market for Brazilian beef. Make sure to label all aspects of the graph including intercepts, axes, and equations.
(b) Calculate the producer and consumer surplus and deadweight loss in the social optimum. Indicate these on your graph from part (a).

In an attempt to reduce the demand for Brazilian imported beef to promote the conservation of the Amazon Rainforest, the U.S. government introduces a tax on the imported beef. These taxes act as additional marginal cost and are represented by the function: MCt(q) = 25 + q.

(c) Calculate the consumer and producer surplus after this tax is imposed.
(d) Depict your results from part (c) in a new graph that accounts for this tax.
(e) Given the situation described in this problem, how would you explain the benefits of taxation to people who do not have an understanding of economics?

Answer rating: 100% (QA)

a At Private equilibrium MB MC p 100 q 40 q q q 100 40 2q 60 q 602 q 30 Private equilibrium quantity ... View the full answer