Micro2Solutions

In this example total consumer surplus 1224 840

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Unformatted text preview: )*40 = $320. If ATC = $17, subsidy needed is 40*(17 -8) = $360. Public will vote to shut down the Crown Corporation Page 30 of 33 ©Prep101 www.prep101.com/freestuff Use the following figure to answer question 48: Price ($/unit) Marginal social cost 18 Marginal private cost 15 12 9 Demand 40 60 80 Quantity Q48. In order to promote an efficient allocation of resources, the government could impose an excise tax equal to a) b) c) d) e) $15 $12 $9 $6 $3 Solution: d) $6 Efficient level is achieved when D = MSC At Q= 60, MPC = $9 tax = $15 - $9 =$6 Q = 60 and P = $15 Page 31 of 33 ©Prep101 www.prep101.com/freestuff Use the following figure to answer question 49: Cost & benefit ($) MSC 12 10 MPC 8 6 4 D=MB 0 50 70 Quantity Q49. Suppose the government wants to use marketable permits to enforce the efficient level of output. If one permit allows a firm to produce one unit of output, the government should sell ____ permits which will trade at a price of ____each. a) b) c) d) e) 50; $4 50; $6 50; $8 20; $6 20; $4 Solution: a) 50; $4...
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