Price (dollars per ton) The graph illustrates the unregulated market for uranium

Question

Price (dollars per ton) The graph illustrates the unregulated market for uranium. 420- When the mines produce uranium, they also create waste, which they dump into a nearby river The marginal external cost of the dumped waste is equal to the marginal private cost of producing uranium (that is, the marginal social cost of producing the uranium is double the marginal private cost.) If no one owns the river, the quantity of uranium produced is tons a week. The efficient quantity of uranium is tons a week. 40 60 80 100 Quantity (tons of uranium per week) Enter your answer in each of the answer boxes. F8 F10 F11 7 0

Explanation / Answer

1> If no one owns.....80 tons

Reason

The market equilibrium is where the supply and demand curve connects, thus it should be 80 tons.

2> The efficient .... 40 tons

Reason

At efficient, we need to use marginal social cost rather than private cost, as the MSC is twice MC here, the efficient quantity will be half of it.

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