Suppose the market demand for a good takes the form: 1 Q=120- D 4 P and...

 

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Suppose the market demand for a good takes the form: 1 Q=120- D 4 P and market supply takes the form: 1 O=30+-P 2 and production of each unit causes $30 in (external) damage. What is the total surplus in this market if a policy is passed that effectively "internalizes" the externality? (Note: with external damages the overall benefit from a market is often referred to as "social welfare" instead of total surplus. Regardless, to answer this question subtract total external damages from tax revenue, consumer surplus, and producer surplus) Suppose the market demand for a good takes the form: 1 Q=120- D 4 P and market supply takes the form: 1 O=30+-P 2 and production of each unit causes $30 in (external) damage. What is the total surplus in this market if a policy is passed that effectively "internalizes" the externality? (Note: with external damages the overall benefit from a market is often referred to as "social welfare" instead of total surplus. Regardless, to answer this question subtract total external damages from tax revenue, consumer surplus, and producer surplus)

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11 Demand function is Qd 120 14P Supply function is Qs 30 12P At e... View the full answer