problem set 6

# problem set 6 - Problem Set #6 (due Friday, February 27) Ec...

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Problem Set #6 (due Friday, February 27) Ec 201 Spring, 2009 Michigan State University L. Martin 1. (external cost) Tailgaters following Michigan State’s national championship football team in 2008 will likely use charcoal lighter fluid before grilling their victory steaks. This lighter fluid creates air pollution. One estimate calculates the external pollution cost per can at \$2.00. Demand and supply for lighter fluid are given below demand supply price quantity price quantity \$3.50 10,000 \$0.50 20,000 \$3.00 15,000 \$1.00 25,000 \$2.50 20,000 \$1.50 30,000 \$2.00 25,000 \$2.00 35,000 \$1.50 30,000 \$2.50 40,000 \$1.00 35,000 \$3.00 45,000 \$0.50 40,000 \$3.50 50,000 a. Find the equilibrium quantity. quantity_____________ b. Find the efficient quantity. quantity_____________ c. What tax on lighter fluid moves this market to the efficient allocation? Tax _______________ d. Draw a diagram illustrating your answer.

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2. (external benefits). An important way to reduce water pollution from farms is to plant
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## This note was uploaded on 10/17/2011 for the course EC 201 taught by Professor Haider during the Spring '10 term at Michigan State University.

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problem set 6 - Problem Set #6 (due Friday, February 27) Ec...

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