Severe snowstorms in the Northeast create hazardous driving conditions. To reduce the number of accidents, many...

   

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Severe snowstorms in the Northeast create hazardous driving conditions. To reduce the number of accidents, many communities apply salt to their roadways. However, salt runoff can damage fish and wildlife habitat, an external cost of $50 per ton not accounted for by highway departments. The market for road salt is shown below. (16 points) $/ton S = MCprivate 200 150 100 50 D Road Salt (tons) 1 2 3 4 5 6 7 8 9 a. (2 points) What are the market equilibrium price and quantity? b. (4 points) What are the socially efficient equilibrium price and quantity? c. (4 points) If society accounts for the externality by imposing a tax of $50 on producers, how much surplus will consumers of road salt gain or lose? d. (4 points) If society accounts for the externality by imposing a tax of $50 on producers, how much surplus will producers of roadsalt gain or lose? e. (2 points) If society accounts for the externality by imposing a tax of $50 on producers, what is the net gain or loss to society? Severe snowstorms in the Northeast create hazardous driving conditions. To reduce the number of accidents, many communities apply salt to their roadways. However, salt runoff can damage fish and wildlife habitat, an external cost of $50 per ton not accounted for by highway departments. The market for road salt is shown below. (16 points) $/ton S = MCprivate 200 150 100 50 D Road Salt (tons) 1 2 3 4 5 6 7 8 9 a. (2 points) What are the market equilibrium price and quantity? b. (4 points) What are the socially efficient equilibrium price and quantity? c. (4 points) If society accounts for the externality by imposing a tax of $50 on producers, how much surplus will consumers of road salt gain or lose? d. (4 points) If society accounts for the externality by imposing a tax of $50 on producers, how much surplus will producers of roadsalt gain or lose? e. (2 points) If society accounts for the externality by imposing a tax of $50 on producers, what is the net gain or loss to society?

Answer rating: 100% (QA)

a Market equilibrium is achieved at the point where market demand is equal to market supply So from the above diagram the equilibrium price and quanti... View the full answer