referring to the graph, can you please answer this: What is the price-quantity c
ID: 1136462 • Letter: R
Question
referring to the graph, can you please answer this:
What is the price-quantity combination determined by the market?
A. P4, Q2
B. P3, Q3
C. P2, Q2
D. P2, Q4
6.2. What is the private benefit of the last unit traded in the market?
A. P1
B. P2
C. P3
D. P4
6.3. What is the private cost of the last unit traded in the market?
A. P1
B. P2
C. P3
D. P4
6.4. What is the social value of the last unit traded in the market?
A. P1
B. P2
C. P3
D. P4
6.5. What is the social cost of the last unit traded in the market?
A. P1
B. P2
C. P3
D. P4
6.6. Which quantity is socially optimal (i.e. what is the efficient quantity)?
A. Q1
B. Q2
C. Q3
D. Q4
What is the deadweight loss generated by the externality?
A. A+B+C+D
B. C+D
C. C
D. Zero
Explanation / Answer
Private or market equilibrium occurs when private value function or demand function is intersected with private cost or supply. This implies that the private value is equal to private cost at the private equilibrium. On the other side social equilibrium occurs when the social value function or demand meets social cost or supply. This results in social value being equal to social cost.
Price quantity combination in the market is P3, Q3. Private benefit of last unit is P3 as well as the private cost of last unit is P3. Social value and social cost both are P2. Thus the socially efficient quantity is Q2. DWL is C + D.
1) Option B
2) Option C
3) Option C
4) Option B
5) Option B
6) Option B
7) Option B
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