In the perfectly competitive widget market, inverse demand is given by Pd(Q) = 100−Q and inverse mar- ket supply is given by Ps(Q) = 25+ 1Q, where Q denotes the total number of widgets sold. Unfortunately, production of widgets causes externalities to society, given by the external marginal cost function M CX (Q) = Q. (Hint: draw a figure for this problem.)

1. (a)  Determine the competitive equilibrium quantity and price of widgets.
2. (b)  Calculate the socially efficient level of widgets.
3. (c)  Calculate the deadweight welfare loss at the competitive equilibrium.
4. (d)  Determine the corrective tax or subsidy after which, after it’s imposed, yields the efficient output at the resulting competitive equilibrium.

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Status NEW Posted 04 Aug 2017 07:08 AM My Price 5.00

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