Trucks impose many external costs on society: heavy air and noise pollution, traffic safety issues and...

 

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Trucks impose many external costs on society: heavy air and noise pollution, traffic safety issues and road congestion, and so on. Therefore, the market equilibrium quantity of diesel trucks does not equal the socially optimal quantity. The following graph plots the demand for diesel trucks (their private value), the supply of diesel trucks (the private cost of producing them), and the social cost of diesel trucks, including both the private cost and external costs. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. PRICE OF DIESEL TRUCKS Social Cost Supply (Private Cost) Demand (Private Value) QUANTITY OF DIESEL TRUCKS + Market Equilibrium Socially Optimal Level Trucks impose many external costs on society: heavy air and noise pollution, traffic safety issues and road congestion, and so on. Therefore, the market equilibrium quantity of diesel trucks does not equal the socially optimal quantity. The following graph plots the demand for diesel trucks (their private value), the supply of diesel trucks (the private cost of producing them), and the social cost of diesel trucks, including both the private cost and external costs. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. PRICE OF DIESEL TRUCKS Social Cost Supply (Private Cost) Demand (Private Value) QUANTITY OF DIESEL TRUCKS + Market Equilibrium Socially Optimal Level

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When private value demand and private cost supply or the market is in eq... View the full answer