Question: The private marginal benefit for commodity X is given by 10 X , where X is the number of units consumed. The private marginal

The private marginal benefit for commodity X is given by 10 – X , where X is the number of units consumed. The private marginal cost of producing X is constant at $ 5. For each unit of X produced, an external cost of $ 2 is imposed on members of society. In the absence of any government intervention, how much X is pro-duced? What is the efficient level of production of X ? How much does society gain by moving from the inefficient to the efficient level of pro-duction? Suggest a Pigouvian tax that would lead to the efficient level. How much revenue would the tax raise?

Step by Step Solution

★★★★★

3.40 Rating (162 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Private Marginal Benefit 10 X Private Marginal Cost 5 External Cost ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

425-B-C-F-G-F (1168).docx

120 KBs Word File

Students Have Also Explored These Related Corporate Finance Questions!

The demand for good X is given by Research shows that the prices of related goods are given by Py = $5,900 and Pz = $90, while the average income of individuals consuming this product is M =...

The demand curve for product X is given by Qdx = 460 = 4Px. a. Find the inverse demand curve. b. How much consumer surplus do consumers receive when Px = $35? c. How much consumer surplus do...

The supply curve for product X is given by Qsx = 340 + 10Px. a. Find the inverse supply curve. b. How much surplus do producers receive when Qx = 350? When Qx = 1,000?

The private marginal benefit for commodity X is given by 10 - X, where X is the number of units consumed. The private marginal cost of producing X is given by 4 + x and producing this commodity...

1. Using Public Finance, I Textbook. Answer, Chapter 5: Q.3, Q.6 3. In the gure here. the number of parties that Cassandra gives per month is measured on the horizontal axis. and dollars spent are...

The private marginal benefit for commodity X is given by 10 X , where X is the number of units consumed. The private marginal cost of producing X is constant at $5. For each unit of X produced, an...

Question 2 (Total = 15 marks) The private marginal benefit for commodity X is given by 25-5X, where X is the number of units consumed. The private marginal cost of producing X is constant at $10. For...

The private marginal benefit for commodity $X$ is given by $10-X$, where $X$ is the number of units consumed. The private marginal cost of producing $X$ is constant at $\$ 5$. For each unit...

a. The private marginal benefit of commodity X is given by MB = 10 - X, the external marginal benefit is constant at $2. If the private marginal cost of producing X is constant at $3, what is the...

1. Externalities & Coase Theorem: Maggie's private marginal benefit for cigars is PMB M (x) = 100 x, where x is the number of cigars. Rui's marginal external cost is MEC R (x) = x/2. Cigars cost...

Table 2.15 reproduces the 100 waiting times for teller service that were originally given in Table 1.8 (page 13). a Construct a stem- and- leaf display of the waiting times. b Describe the...

For each of the following situations, evaluate the segregation of duties implemented by the company and indicate the following: a. Any deficiency in the segregation of duties described (Indicate None...

As player salaries have increased, the cost of attending basketball games has increased dramatically. The file NbaCost2013 contains the cost of four averaged-priced tickets, two beers, four soft...

Refer to Exhibit 5.5 to answer the following ques- tions about Microsoft Corporation investments. a. Microsoft reports unrealized gains and unrealized losses on securities. Accordingly, the...

Over the past several months, an adult patient has been treated for tetany (severe muscle spasms). This condition is associated with an average total calcium level below 6 mg/dl. Recently, the...

The cost of a particular source of capital (debt, preferred stock, common stock) is equal to the investor's required rate of return after adjusting for the effects of both flotation costs (i.e., the...

a. A bond that has $1,000 par value (face value) and a contract or coupon interest rate of 12 percent. A new issue would have a floatation cost of 9 percent of the $1,150 market value. The bonds...