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Unformatted text preview: 4) Draw the marginal social benefit (MSB), marginal private benefit (MPB), marginal social cost (MSC), and marginal private cost (MPC) curves in the market for steel (production of steel causes pollution that hurts people who neither buy or produce the steel). Show the free market quantity (of tons) bought and sold in a free, competitive, market with well informed buyers and sellers. Label this Q Mkt . Label the efficient, optimum, number of tons produced and consumed per period Q Opt . (ignore imports from foreign countries) Give an example of a government policy that can increase efficiency in this market. $/Q Q output, tons per period $/Q Q firm output MC = AVC = ATC Demand for Firms Output MR $/Q Q sold to Yuppies MC = AVC = ATC MR D Yuppies MC = AVC = ATC D Hippies MR Q sold to Hippies $/Q...
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This note was uploaded on 03/11/2008 for the course EC 201 taught by Professor Brown during the Winter '07 term at Cal Poly Pomona.
- Winter '07