Gasoline brings great benefit to those who buy it, but burning it also creates e
ID: 1200226 • Letter: G
Question
Gasoline brings great benefit to those who buy it, but burning it also creates external costs. Consider the graph below, which shows the demand for gasoline, the private marginal cost of producing gasoline, and the social marginal cost of producing gasoline.
Suppose that buyers and producers of gasoline do not consider the external marginal costs they impose on others. Determine the equilibrium quantity and price. Which areas represent the total net value to society when external marginal costs are not considered?
Explanation / Answer
A +B +C
As the external MC are not considered. Therefore, area above SMC.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.