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  • Challenge 3

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    Amit Jindal
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    The document describes a market for textiles from a New Hampshire mill and a market for refined petroleum that contaminates local water supplies. For the textiles market, the competitive equilibrium price is $312.5 per pound and quantity is 975,000 pounds, while the socially optimal price is $475 per pound and quantity is 650,000 pounds. The lost consumer and producer surplus from producing at 650,000 pounds rather than the competitive quantity is $365,62 thousand, and the deadweight loss from an unregulated market is $385,94 thousand. For the petroleum market, the competitive equilibrium price is $22 per barrel and quantity is 160,000 barrels, while the socially optimal price is

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    Challenge 3

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    The document describes a market for textiles from a New Hampshire mill and a market for refined petroleum that contaminates local water supplies. For the textiles market, the competitive equilibrium price is $312.5 per pound and quantity is 975,000 pounds, while the socially optimal price is $475 per pound and quantity is 650,000 pounds. The lost consumer and producer surplus from producing at 650,000 pounds rather than the competitive quantity is $365,62 thousand, and the deadweight loss from an unregulated market is $385,94 thousand. For the petroleum market, the competitive equilibrium price is $22 per barrel and quantity is 160,000 barrels, while the socially optimal price is

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
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    67 views2 pages

    Challenge 3

    Uploaded by

    Amit Jindal
    The document describes a market for textiles from a New Hampshire mill and a market for refined petroleum that contaminates local water supplies. For the textiles market, the competitive equilibrium price is $312.5 per pound and quantity is 975,000 pounds, while the socially optimal price is $475 per pound and quantity is 650,000 pounds. The lost consumer and producer surplus from producing at 650,000 pounds rather than the competitive quantity is $365,62 thousand, and the deadweight loss from an unregulated market is $385,94 thousand. For the petroleum market, the competitive equilibrium price is $22 per barrel and quantity is 160,000 barrels, while the socially optimal price is

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    Question 1

    9.5 / 10 points

    The figure below represents the Market for Textiles from a New Hampshire Mill. Quantity is in thousands of pounds and Price is dollars per pounds of textiles.

    Instructions: Enter dollar values to two decimal places. What is the competitive market equilibrium price $ ___312.5___ and quantity ___975000___ pounds. (10 %) (10 %)

    What is the Socially optimal equilbrium price $ ___475___ and quantity ___650___ pounds. (10 %) (5 %)

    If the market is truly competitive, what is the lost consumer and producer surplus (efficiency loss) when we produce at 650,000 pounds? Enter your value as whole numbers. $ ___36562___ thousand. (30 %)

    If the market should be operating at the Socially optimal equilibirum and is at a competitive equilibrium, what is the deadweight loss that occurs under an unregulated market outcome. (This is also the net gain to society from being at the socially optimal output level). $ ___38594___ thousand (30 %)

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    10 / 10 points

    The production of refined petroleum contaminates local water supplies. Because the negative effects are not captured by the private market, there is a market failure, which is illustrated by the following functions, where Q is the amount of refined petroleum in thousands of barrels, and P is the price per barrel: MSB = 42.0 0.125Q MEB = 0 MPC = 10.0 + 0.075Q MEC = 0.05Q

    INSTRUCTIONS: Enter all values as whole numbers. a. Find the competitive equilibrium price and quantity. Price = $ ___22___ (20 %) per barrel Equilibrium Quantity = ___160___ (20 %) thousand barrels b. Find the socially optimal equilibrium price and quantity. Price = $ ___26___ (20 %) per barrel Equilibrium quantity = ___128___ (20 %) thousand barrels c. What is the net gain to society from reduced pollution, if the petroleum producer produced at the socially optimal quantity? $ ___128000___ (20 %)

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