Production of Commodity X creates 10 pounds of emissions for every unit of X pro
ID: 1189747 • Letter: P
Question
Production of Commodity X creates 10 pounds of emissions for every unit of X produced. The demand and supply curves for X are described by the following table:
Price
Quantity Demanded
Quantity Supplied
$10
80
100
9
85
95
8
90
90
7
95
85
6
100
80
5
105
75
a. What is the equilibrium price and quantity, and how much pollution will be emitted?
b. If the government imposes a tax of $2 per unit, what is the new equilibrium price and quantity?
c. With the tax described in part b), how much pollution will be emitted?
d. Compare your answers to part a) and c); how much does pollution differ due to the $2/unit tax on the polluting output?
Price
Quantity Demanded
Quantity Supplied
$10
80
100
9
85
95
8
90
90
7
95
85
6
100
80
5
105
75
Explanation / Answer
a. Equilibrium price will be $8 as QD = QS at that price.
Quantity will be 90 units
Emissions will be = 90 units * 10 pounds = 900 pounds
b. After tax $2,
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