哈维财政学英文题库 CHA1(14)

Ans:

(a.) Set PMC equal to demand and solve for P and X. X= 50/9, P = 170/9.

(b.) Find SMC by adding PMC to MD. Set SMC equal to demand and solve for P and X. X = 49/11, P = 232/11.

(c.) At X = 49/11, subtract PMC from SMC. Tax = 109/22.

22. A steel factory has the right to discharge waste into a river. The waste reduces the number of fish, causing damage for swimmers. Let X denote the quantity of waste dumped. The marginal damage, denoted MD, is given by the equation MD = 2 + 5X. The marginal benefit (MB) of dumping waste is given by the equation MB = 34 – 3X. (a.) Calculate the efficient quantity of waste.

(b.) What is the efficient fee, in dollars per unit of waste, that would cause the firm to dump only an efficient quantity of waste?

(c.) What would be the quantity dumped if the firm did not care about the fishery? Ans:

(a.) Set MD = MB and solve for X. X= 32/6.

(b.) Insert 32/6 into either MD or MB. Fee = 86/3. (c.) Set MB equal to zero and solve for X. X = 34/3.

23. The private marginal benefit for commodity X is given by 15 – X, where X is the number of units consumed. The private marginal cost of producing X is constant at 10. In the absence of any government intervention, how much X is produced? What is the gain to society involved in moving from the inefficient to the efficient level of production?

Ans: Without intervention, optimal will be where PMB = 0. X = 15. The efficient level is X = 5. The area beneath the PMB is gained. Gain = 25.

24. Consider the case of two farmers, Tony and Hakim, depicted in the figure below. Both use DDT (a chemical pesticide) for their crops. The use of DDT causes an externality for swimmers down river from the farms.

(A) Show the amount of pesticides used if each uses the privately optimal level of pesticides. (B) Show the amount of pesticides used if they are socially concerned. (C) Why is a reduction back to XH = HT not socially desired?

Ans: (A)

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