{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

lect01-28-10

# lect01-28-10 - Marginal Cost(MC Cost of Producing...

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

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Marginal Cost (MC) - Cost of Producing Additional (or Last) Unit Marginal External Cost (MEC) - External Cost of Producing Additional (or Last) Unit Marginal Social Cost (MSC) - Social Cost of Producing Additional (or Last) Unit MSC = MC + MEC Relationship of Supply Curve and MC Price of Corn P\$5 4 S = MC P =4 Q=50 MC=4 3 2 1 P QS \$1 5 2 20 3 35 4 50 5 60 Q CORN o 10 20 30 40 50 60 70 80 Quantity of Corn Supply Curve and MSC Price of Corn P\$5 P =4 Q=50 MC=4 MEC = 1 MSC = 5 4 3 2 1 S = MC P QS \$1 5 2 20 3 35 4 50 5 60 Q CORN o 10 20 30 40 50 60 70 80 Quantity of Corn Supply Curve and MSC Curve Price of Corn MSC = MC + MEC S = MC P\$5 P =4 Q=50 MC=4 MEC = 1 4 3 2 1 P QS \$1 5 2 20 3 35 4 50 5 60 Q CORN o 10 20 30 40 50 60 70 80 Quantity of Corn Market for Corn Price of Corn P\$5 4 3 2 1 S=MC D 10 20 30 40 50 60 70 80 Quantity of Corn o Q Market Outcome vs. Socially Desirable Outcome MSC = MC + MEC Price of Corn P\$5 S=MC 4 3 2 1 Qm = 35 Qsd = 28 D 10 20 30 40 50 60 70 80 Quantity of Corn o Q Policy Implications? Possible Corrective Policy Instruments Direct Controls, Taxes/Subsidies, Permits Levels of Policy Instruments? Determining Corrective Tax Level Price of Corn MSC = MC + MEC S=MC P\$5 4 3 2 1 Qm = 35 Qsd = 28 MEC= 1 Tax = 1 MEC { D o 10 20 30 40 50 60 70 80 Quantity of Corn Q Full Cost Pricing Price of Corn MSC = MC + MEC S=MC Psd = MSC MEC P\$5 4 Psd = 3.5 Qm = 35 Qsd = 28 MEC= 1 Tax = 1 3 2 1 { "Full Cost Price" D 10 20 30 40 50 60 70 80 Quantity of Corn o Q Food Prices Not As High As We Would Want Price of Corn MSC = MC + MEC S=MC P\$5 Psd = MSC "Full Cost Price" 4 3 2 1 MEC { D o 10 20 30 40 50 60 70 80 Quantity of Corn Q "Food Prices Not As High As We Think" Price of Corn MC S=MC-Subsidy P\$5 4 3 2 1 Subsidy { D o 10 20 30 40 50 60 70 80 Quantity of Corn Q ...
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern