I’m working on a economics multi-part question and need support to help me study.
In the early 1800s, British economist Thomas Malthus hypothesized that population growth would exceed the worlds ability to supply _______________ (food, water, clothing, shelter). As it turns out, Malthus was wrong. It appears that he underestimated how future increases in ___________ (human, natural, financial) and physical _____________ (capital, strength), as well as (medicinal, technological, agricultural) progress, would dramatically increase the worlds productivity. Perhaps what Malthus overlooked was that expanding populations do not only require food in order to survive and thrive; they also require more space for _______________ (financial, urban, spiritual) development, ________________ (residential, physical, mental) development, and ____________________ (industrial, intellectual, childhood) development). This is because all of these encroach on farmland, forests, and ____________________ (man- made, natural, industrial) ecosystems.
Please indicate whether you would expect the following activities to generate positive or negative externalities (you may, if you feel the need, provide a very short explanation to defend your view).
Externality Type (positive or negative)
A paper mill located upstream produces high quality paper, most of which it sells to a small town located downstream. It also disposes much of its waste in the local river.
A very competent amateur ecologist keeps and breeds a rare water turtle species; a hobby she greatly enjoys. Once a year she releases a number of them into local rivers, lakes, and ponds, which also happen to be that rare turtles natural habitat.
On their plot of land, a family has planted a number of large trees, as well as a beautiful garden that is visible to all that drive by.
An increasing number of people buying all- electric vehicles.
Suppose that the demand schedule for new custom motorcycles in the island nation of Motora is given by ????= 120 0.07Q and the supply schedule of these motorcycles is given by
????= 6 + 0.06Q. ???? and ???? represent the price of new custom motorcycles in thousands of dollars, and Q is the quantity demanded per year in thousands.
(a) Calculate the market equilibrium quantity of custom motorcycles. (Hint: Equate the demand and supply functions to calculate ????.) (6 points)
- (b) Use the above value of ?? to calculate the market equilibrium price ?? . (Hint: Substitute ????your ?? either into the supply function or the demand function and solve for ?? .)
- (c) Upcoming sections will ask you to sketch a graph of the demand and supply of custom motorcycles in Motora. Calculate the price (y-axis) intercept of the demand curve.
(d) Calculate the price (y-axis) intercept of the supply (private marginal cost) curve.
(e) Using the numerical values you have calculated in (a) through (d), sketch in the space below a graph of the demand and supply of new custom motorcycles. Make sure your graph clearly shows and labels (i) exactly where the demand and supply curves intersect the y-axis and (ii) the equilibrium market price and quantity of motorcycles (ignoring for now any externalities).
- (f) Now suppose that a group of competent environmental economics researchers at the Motora Institute of Technology have quantified in dollar terms the externality costs imposed by each new custom motorcycle: $3,000. Given this information, sketch on the graph above the social marginal cost curve. (Hint: The private marginal cost curve will shift up by $3,000.)
- (g) On the graph above, label the areas A, B, C, D, E, F, G, H, I and J, exactly as they correspond to the graph in your class notes (as shown also in Chapter 3 Supplementary Notes posted on BB).
- (h) Calculate consumer and producer surplus at the market price (i.e., in the absence of any Pigouvian tax).
- (i) Calculate the total market benefits (Hint: Sum consumer and producer surplus in the absence of a Pigouvian tax).
- (j) Calculate the total externality damage.
- (k) Calculate the net social benefit (NSB) without any Pigouvian tax.
(l) The scientists at the Motora Institute of Technology have convincingly argued that to achieve a more efficient allocation of the islands resources, a tax of $3,000/motorcycle must be imposed on producers. Calculate the new socially optimal price (???) and quantity (???) of motorcycles, and shows these on your graph above. (8 points)
(m) How do the socially optimal price and quantity differ from their free market counterparts? (3 points)
(n) Calculate the increase in net social benefits due to the Pigouvian tax. (8 points