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ECON3128/ECON6040 Tutorial 2 Semester 2 - 2022
发布时间：2022-08-30
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ECON3128/ECON6040
Tutorial 2
Semester 2 - 2022
Problem Solving
Q1 Suppose the demand curve for an electronic tablet is:
Pd = 200 − 3Q
where Q is the number demanded in thousands. The supply curve is: Ps = 20 + 3Q
where, again, Q is measured in thousands. Production of the tablets, considering the materials used, the wastes created, transportation, and packing results in $30 of external costs per tablet.
a. Solve for the equilibrium price and quantity in the tablet market without any regulation, both algebraically and using a supply-and- demand graph.
b. What is total social welfare in the tablet market without any reg- ulation? Solve for consumer surplus, producer surplus, and the ex- ternality damage algebraically. Also show these areas in your graph from part (a).
c. If the correct Pigovian tax is instituted, what will be the new equi- librium price and quantity in the tablet market? Solve algebraically and also show this on a graph (the same graph from above or a new graph).
d. What is total social welfare in the tablet market with the correct Pigovian tax? Solve for consumer surplus, producer surplus, the externality damage, and the tax revenues algebraically. Also show these areas in your graph from part (c).
Q3 A factory discharges effluent, which damages the water supply of a com- munity downstream. Suppose the marginal benefit of pollution for the factory is given by MB = 60 − Q and the marginal cost of damages from that pollution is given by MC = 
, where Q is the number of units of pollution.
a: What is the optimal pollution level for the factory? What is the optimal pollution for residents?
b: What is the social optimal pollution level and the per-unit price at the optimal level?
c: Draw a diagram to illustrate your results from (a) & (b) and label the areas of your diagram.
d: At Q f(*), what is the total benefit of pollution for the factory, the total cost of pollution for the community, and the net social benefit of pollution, in terms of both areas and value?
e: Suppose that the factory has the right to pollute and that the com- munity pays the factory to pollute at the optimal level. Referring to your diagram in (c), what is the net benefit for each party and for society in terms of both areas and values?
f: Suppose instead that the community has the right to clean water and the factory pays the community to be able to pollute at the optimal level. Referring to your diagram in (c), what is the net benefit for each party and for society in terms of both areas and values?
