Assume the market demand for cigarettes is as follows: Price per pack 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 Quantity (packs per day) 100 90 80 70 60 50 40 30 20 Suppose further that smoking creates external costs valued at 50 cents per pack. a.Draw the social and market demand curves b.At 3.50 per pack, what quantity is demanded in the market? c.What is the socially optimal quantity at that price?
Assume the market demand for cigarettes is as follows: Price per pack 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 Quantity (packs per day) 100 90 80 70 60 50 40 30 20 Suppose further that smoking creates external costs valued at 50 cents per pack. a.Draw the social and market demand curves b.At 3.50 per pack, what quantity is demanded in the market? c.What is the socially optimal quantity at that price?
Chapter14: Environmental Economics
Section: Chapter Questions
Problem 11SQ
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Question
Assume the market demand for cigarettes is as follows:
Price per pack |
1.00 |
1.50 |
2.00 |
2.50 |
3.00 |
3.50 |
4.00 |
4.50 |
5.00 |
Quantity (packs per day) |
100 |
90 |
80 |
70 |
60 |
50 |
40 |
30 |
20 |
Suppose further that smoking creates external costs valued at 50 cents per pack.
a.Draw the social and market demand
b.At 3.50 per pack, what quantity is demanded in the market?
c.What is the socially optimal quantity at that price?
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