Purchase Solution

External Cost

Not what you're looking for?

Ask Custom Question

Suppose the external marginal cost of pollution is MCext = 5Q and the internal marginal cost is MCint = 10Q . Further, assume the inverse demand for the product, Q, is given by P = 90-Q .

a. What is the socially efficient level of output?

b. How much output would a competitive industry produce?

c. How much output would a monopoly produce?

d. Discuss three ways government can induce firms to produce the socially efficient level of output.

Purchase this Solution
Solution Summary

The solution is concise and to the point and explains the concepts very well. The solution is very easy to understand as well. Overall, an excellent response to the question being asked.

Solution Preview

Socially efficient level of output will be when Total MC = Total MR.
Total Marginal Cost = 5Q + 10Q = 15Q
Marginal Revenue = 90 - 2Q
Thus MC=MR when 15Q = 90 - 2Q
=> 17Q = 90
=> Q ...

Purchase this Solution
Free BrainMass Quizzes
Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

View More Free Quizzes
Related BrainMass Solutions

  • Cost of External Equity

    s cost of external equity?

  • Inspection Cost

    It will reduce its cost of external failures by 60,000 (units) *.02 (reduction in failure rate)*$40 (cost per external failure), or $48,000. Thus, it will incur a $60,000 cost to save only $48,000.

  • Cost of Equity

    Statement 4 is correct as cost of external equity involve flotation cost and if dividend is giving higher returns then the return on external investment will be higher; thus the cost to external equity will be higher.

  • Cost of external equity

    What is NA's cost of external equity if its stock can be sold to net $46 a share? Cost of external equity= Expected dividend/Stock price+growth rate =(1.8*(1.07)/46)+7% =11.18%= Answer This explains the computation of Cost of external equity

  • External Equity for Combs Inc

    s cost of external equity is 13.20% The solution examines external equity for Combs Inc. The flotation costs will be 5% of the market price.

  • External Financing Needed

    163688 Figuring Out External Financing Needed Trying to figure out the external financing needed (assuming no income taxes). Assets and cost are proportional to sales. Debt and equity are not. No dividends are paid.

  • Payment to an external supplier for this unit

    Division A minimum charges will be Variable cost+relevant fixed cost: Hence from the company perspective it will be =Variable manufacturing cost +Relevant fixed manufacturing cost =1075+40%*2750 =$2175 Hence c is the answer Response provides steps

  • Benefits of economies of scale.

    When these savings reduce cost and increases productivity, the company has successfully executed economies of scale. External Economies of Scale External aspects are economies of scale outside of the company that impacts cost and production.

  • Benefits of shorthand approach for estimating external funds

    This approach helps to reduce the cost of raising external resources to accomplish the financial needs to increase the net sales of a business.

  • Cost Classifications for The Door Company

    Appraisal costs, on the other hand, are cost incurred to test and inspect products in order to identify those products that do not meet specifications. Internal and external failure costs are considered the quality cost outputs.

View More Related Solutions