The following table shows the private value, private cost, and external cost for various quantities of output in a

Question

The following table shows the private value, private cost, and external cost for various quantities of output in a market. Quantity Private value Private cost External cost 1 $14 $10 $2 2 13 11 2 3 12 12 2 4 11 13 2 5 10 14 2 6 9 15 2 7 8 16 2 a) What is the competitive equilibrium (PP and QQ) in this market (i.e. the equilibrium) with no government intervention? b) What is the socially optimal equilibrium (PP and QQ)?

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Quantity Private value Private cost External cost Social cost = Private cost + External cost 1 $14 $10 $2 $12 2 13 11 2 $13 3 12 12 2 $14 4 11 13 2 $15 5 10 14 2 $16 6 9 15 2 $17 7 8 16 2 $18 a) The competitive equilibrium price and quantity is where Private value = Private cost. From the table it is seen that P = $12 and Q = 3. b) The socially optimal equilibrium price and quantity is where Private value = Social cost. From the table it is seen that P = $13 and Q = 2.

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The following table shows the private value, private cost, and external cost for various quantities of output in a market

Expert Solution

Archived Solution

Quantity	Private value	Private cost	External cost
1	$14	$10	$2
2	13	11	2
3	12	12	2
4	11	13	2
5	10	14	2
6	9	15	2
7	8	16	2

Quantity	Private value	Private cost	External cost	Social cost = Private cost + External cost
1	$14	$10	$2	$12
2	13	11	2	$13
3	12	12	2	$14
4	11	13	2	$15
5	10	14	2	$16
6	9	15	2	$17
7	8	16	2	$18

Quantity	Private value	Private cost	External cost	Social cost = Private cost + External cost
1	$14	$10	$2	$12
2	13	11	2	$13
3	12	12	2	$14
4	11	13	2	$15
5	10	14	2	$16
6	9	15	2	$17
7	8	16	2	$18