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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## This note was uploaded on 08/26/2010 for the course ECON 208 taught by Professor Dickenson during the Fall '07 term at McGill.

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