Imagine that Sunflower, a private company, recycles bottles and supplies to beverage companies. The following table shows the company’s private marginal costs and external benefits to the society from the company’s recycling Output (‘00’ Kwh) Price (£) Marginal (private) costs (£) Marginal external benefit (£) Marginal social cost (£) 1 80 64 20 2 80 60 20 3 80 60 16 4 80 64 12 5 80 68 8 6 80 72 8 7 80 80 8 8 80 88 8 9 80 96 8 10 80 112 4 Fill in the column for marginal social cost Assuming no government intervention, how much will the firm produce to maximise profits and why? 3.What is the socially optimum level of output and why?
Imagine that Sunflower, a private company, recycles bottles and supplies to beverage companies. The following table shows the company’s private marginal costs and external benefits to the society from the company’s recycling Output (‘00’ Kwh) Price (£) Marginal (private) costs (£) Marginal external benefit (£) Marginal social cost (£) 1 80 64 20 2 80 60 20 3 80 60 16 4 80 64 12 5 80 68 8 6 80 72 8 7 80 80 8 8 80 88 8 9 80 96 8 10 80 112 4 Fill in the column for marginal social cost Assuming no government intervention, how much will the firm produce to maximise profits and why? 3.What is the socially optimum level of output and why?
Chapter14: Environmental Economics
Section: Chapter Questions
Problem 7SQ
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1b. Imagine that Sunflower, a private company, recycles bottles and supplies to beverage companies. The following table shows the company’s private marginal costs and external benefits to the society from the company’s recycling
Output (‘00’ Kwh) |
Price (£) |
Marginal (private) costs (£) |
Marginal external benefit (£) |
Marginal |
1 |
80 |
64 |
20 |
|
2 |
80 |
60 |
20 |
|
3 |
80 |
60 |
16 |
|
4 |
80 |
64 |
12 |
|
5 |
80 |
68 |
8 |
|
6 |
80 |
72 |
8 |
|
7 |
80 |
80 |
8 |
|
8 |
80 |
88 |
8 |
|
9 |
80 |
96 |
8 |
|
10 |
80 |
112 |
4 |
|
- Fill in the column for marginal social cost
- Assuming no government intervention, how much will the firm produce to maximise profits and why?
3.What is the socially optimum level of output and why?
4. What subsidy per (‘000’) would the government have to pay the company to encourage it to produce this level of output?
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