Purchase Solution

# Socially Efficient Price and Quantity of the Good

Not what you're looking for?

=====
1. Demand for the product is Q = 50-1/2pe
2. Supply is determined by the equation Q = -20+2pe
a. What is the equilibrium price and quantity of the good in a perfectly competitive market?
b. No imagine that consumption of each unit of the good creates 20 dollars in externality. Illustrate the social welfare loss associated with this externality and identify it on a graph
c. What is the amount of social welfare lost
d. What is the socially efficient price and quantity of the good which should be supplied?
e. What could a community do about this situation? How might it control consumption of the good to limit the external costs?

##### Solution Summary

What is the socially efficient price and quantity of the good which should be supplied is determined. The equilibrium price and quantity of the good in a perfectly competitive market is examined.

##### Solution Preview

1. Demand for the product is Q = 50-1/2pe
2. Supply is determined by the equation Q = -20+2pe

a. What is the equilibruim price and quantity of the good in a perfectly competitive market?
Solve for the equations system:
Q = 50-1/2 pe = -20+2 pe
70 = 5/2 Pe
Pe = 70*2/5 = 28
Q= 50-1/2 * 28 = 36

b. Now imagine that consumption of each unit of the good creates 20 dollars in externality. Illustrate the social welfare loss associated with this ...

##### 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.

##### Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

##### Elementary Microeconomics

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