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- Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and output. a. Assuming that the production of televisions generates external costs, illustrate the effect of the producers being forced to pay a tax equal to the external costs generated, and indicate the equilibrium output. b. If instead of generating external costs, television production generates external benefits, illustrate the effect of the producers being given a subsidy equal to the external benefits generated, and indicate the equilibrium output.Which of the following policies could help the government achieve the efficient outcome? Check all that apply. Introduce emission taxes Offer a subsidy to consumers equal to the vertical distance between the marginal private benefit curve and the marginal social benefit curve Implement tradable pollution permits Offer a subsidy equal to the price at the efficient outcome Offer a subsidy to producers equal to the vertical distance between the marginal private benefit curve and marginal social benefit curveParks confer many external benefits on society: open space, trees that reduce pollution, and so on. Therefore, the market equilibrium quantity of parks is not equal to the socially optimal quantity. The following graph shows the demand for parks (their private value), the supply of parks (the private cost of producing them), and the social value of parks, including both the private value and external benefits. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.
- Parks confer many external benefits on society: open space, trees that reduce pollution, and so on. Therefore, the market equilibrium quantity of parks is not equal to the socially optimal quantity. The following graph shows the demand for parks (their private value), the supply of parks (the private cost of producing them), and the social value of parks, including both the private value and external benefits. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. (?) Supply (Private Cost) Market Equilibrium Socially Optimal Level Social Value Demand (Private Value) QUANTITY OF PARKS PRICE OF PARKSSuppose demand is QD =12 - P supply is QS = 2P. There is a constant positive externality of $6 per unit (Marginal External Benefit, MEB = $6). What subsidy would achieve the efficient allocation? In other words, what subsidy would maximize social surplus? (Do not overthink this one.) Find quantity given this subsidy. What is the social benefit that accrues due to the quantity in the previous part? (Hint: It is MEB times the quantity.) Find (private) producer surplus given this subsidy. Find (private) consumer surplus given this subsidy. How much would this subsidy cost the government? In other words, find government “revenue” (which will end up being a negative number). Add up the answers to the previous four questions to find social surplus. (It should be the same as the area between MSB and MSC.)Suppose the equation for the demand curve in a market is P=100 - 1.5Q. Also, suppose the equation for the supply curve in the same market is P=0.5Q. Suppose there is an external cost of $40 associated with the production of each unit of the good. What is the socially optimal quantity, and what is the price at this quantity? P=$31 Q=46 P=$34 Q=44 P=$55 Q=30 P=$2 Q=44 O.