hw6 - to cut back its snippet production to 40? How much is...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 108 Landsburg Homework #6 week of 10/23/06 RECOMMENDED READING: p. 292-295. 1. The R.H. Snippet company creates pollution every time it produces a snippet. The demand curve for the company’s products is flat. The social and private marginal cost curves are as illustrated. (The numbers represent areas.) 12 5 2 4 MC MC private social D Quantity Price 50 40 a) Suppose there is no penalty for polluting, no possibility of bargaining between the firm and the neighbors, and no possibility that the neighbors will move away. How many snippets does the firm produce? What is the social gain? b) Continue to assume there are no legal penalties for polluting and no possibility the neighbors will move away, but now assume there are no transaction costs between the firm and the neighbors. How much are the neighbors willing to pay the firm
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: to cut back its snippet production to 40? How much is the rm willing to accept? Is a bargain struck? What is the new social gain? 2. Use the graph from Problem 1. Assume theres no possibility of bargaining and that it would cost the neighbors $3 to move away. a) If the rm faces no legal penalty for polluting, will the neighbors move? How many snippets are produced? What is the social gain? b) If the rm must reimburse the neighbors for all pollution damage, will the neigh-bors move? How many snippets are produced? What is the social gain? 3. A competitive rm faces the following total cost curve: Q TC 1 8 2 10 3 14 4 20 5 28 6 38 7 50 Suppose the price of the item is $6. Derive the rms marginal cost and marginal revenue tables. At what quantity is prot maximized?...
View Full Document

This note was uploaded on 06/09/2008 for the course ECO 108 taught by Professor Landburg during the Fall '06 term at Rochester.

Ask a homework question - tutors are online