a2odd_Fall2008 - CARLETON UNIVERSITY Department of...

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CARLETON UNIVERSITY Department of Economics ECON 1000A TUTORIAL ASSIGNMENT 2 GROUPS 1,3,5,7,9,11 INSTRUCTOR: D.Smith Fall 2008 1. All of the sections of this question are based on the following equations. ABC Company produces ODOURGONE, a popular room deodorizer. The production process emits sulfur dioxide into the atmosphere. The marginal private cost (MPC) of producing ODOURGONE is: MPC = 1 Qs. The marginal social cost is MSC = 1.5 Qs The demand curve for ODOURGONE is P = 12- 0.5Qd. Qs is the quantity of ODOURGONE supplied, P is the price of ODOURGONE in dollars and Qd is the quantity demanded. (a) In an unregulated market, what is the equilibrium price and quantity of ODOURGONE?
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(b) To be allocatively efficient, what should the price and quantity be? (c) How does the unregulated price and quantity compare with the optimal price and quantity? (d) If the government were to impose a tax on ODOURGONE, what should the tax be to reach
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This note was uploaded on 10/11/2011 for the course ECON ECON 1000 taught by Professor Michaelfrancis during the Fall '11 term at Carleton.

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a2odd_Fall2008 - CARLETON UNIVERSITY Department of...

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