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ols Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative. externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $490. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $490 per unit. (?) PRICE (Dollars per unit of electric cars) 1400 1260 1120 980 F 840 700 560 420 280 140 0 0 1 O The market equilibrium quantity is O 2 3 4 5 QUANTITY (Units of electric cars) 6 Supply (Private Cost) Demand (Private Value) 7 Social Cost units of electric cars, but the socially optimal quantity of electric car production is To create an incentive for the firm to produce the socially optimal quantity of electric cars, the government could impose a per unit of electric cars. units. A

ols Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative. externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $490. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $490 per unit. (?) PRICE (Dollars per unit of electric cars) 1400 1260 1120 980 F 840 700 560 420 280 140 0 0 1 O The market equilibrium quantity is O 2 3 4 5 QUANTITY (Units of electric cars) 6 Supply (Private Cost) Demand (Private Value) 7 Social Cost units of electric cars, but the socially optimal quantity of electric car production is To create an incentive for the firm to produce the socially optimal quantity of electric cars, the government could impose a per unit of electric cars. units. A

Exploring Economics
Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter8: Market Failure
Section: Chapter Questions
Problem 2P: Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and...
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y Tools ips ps J and mentz Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative. externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $490. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $490 per unit. PRICE (Dollars per unit of electric cars) 1400 1260 1120 980 840 700 560 420 280 140 0 0 1 C The market equilibrium quantity is ■ O 2 3 4 5 QUANTITY (Units of electric cars) 6 Supply (Private Cost) Demand (Private Value) 7 Social Cost (?) units of electric cars, but the socially optimal quantity of electric car production is To create an incentive for the firm to produce the socially optimal quantity of electric cars, the government could impose a per unit of electric cars. units. of $ A
Transcribed Image Text:y Tools ips ps J and mentz Consider the market for electric cars. Suppose that a electric car manufacturing facility dumps sludge into a nearby river, creating a negative. externality for those living downstream from the facility. Producing additional electric cars imposes a constant per-unit external cost of $490. The following graph shows the demand (private value) curve and the supply (private cost) curve for electric cars. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $490 per unit. PRICE (Dollars per unit of electric cars) 1400 1260 1120 980 840 700 560 420 280 140 0 0 1 C The market equilibrium quantity is ■ O 2 3 4 5 QUANTITY (Units of electric cars) 6 Supply (Private Cost) Demand (Private Value) 7 Social Cost (?) units of electric cars, but the socially optimal quantity of electric car production is To create an incentive for the firm to produce the socially optimal quantity of electric cars, the government could impose a per unit of electric cars. units. of $ A
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