The production of low-cost electronic gadgets has surged,...

The production of low-cost electronic gadgets has surged, leading to environmental concerns due to waste and pollution. In this market, the price of a gadget is $11, and the marginal external cost is $2.50 per unit. What is the marginal social cost of producing one unit at the market equilibrium? a) $2.50 b) $14.50 c) $10.00 d) $13.50

Consider the graph below about a battery factory in country X. It shows marginal private and social costs of the production of a type of batteries. Currently, production in country X is banned completely. The batteries would have a negative effect on 30 families living close to the factory. Marginal private cost is linear. The market is competitive (due to foreign imports) and the market price is 20. The hatched area has a surface of 11. Which statement is certainly true? a) If production were allowed, the optimal Pigouvian tax would be €4. b) If production were allowed, the optimal Pigouvian tax would generate €48 in taxes. c) If the government allows production and enforces compensation, producer surplus in country X will go up by €79. d) If the government allows for Coasean bargaining, the factory will pay €11 to the families.

Breanna O.

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