HW 8q - Total External Costs Net Economic Surplus...

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AEM 250, Environmental and Resource Economics, Spring 2007 Homework #8: Renewable Resources and Monopoly (Distributed April 27. Due by beginning of class on May 4) Note: we will discuss alternative due dates in class. Notes: Clearly label your graphs and identify your answers. If we can’t read it we can’t grade it. 1. a. Using our oil market from throughout the class where: Market Quantity Demanded : Q D = 120 – 2 P P = 60 – (1/2)Q D Marginal Revenue: MR = 60 - Q D Market Quantity Supplied: Q S = (14/5) P P = (5/14) Q S Marginal external social cost: MESC = 15 (all prices are in $) Please fill out the following table. Equilibrium Q P Producer’s Surplus Consumer’s Surplus
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Unformatted text preview: Total External Costs Net Economic Surplus Competitive Market Equilibrium Social Equilibrium Monopolist Equilibrium To identify each point, it helps to think about what the relevant marginal benefits and marginal costs are to each decision maker/setting. Feel free to use answers or information from the class notes. However, be sure that you understand the concepts underlying each equilibrium point. b. Given your answer in Part A, would you agree or disagree that monopolists are good for the environment? Why? 2. Harris problem 1 p. 324. 3. Harris problem 2 a –d, p. 324-325. Think about, but don’t answer the questions following D. 4. Harris, problem 1, p. 351....
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