Question

Suppose a factory emits pollution into the air during its production process. The demand​ (D) for its output​ (Q) is p​= 2400- Q, its marginal cost of production​ (MC) is MC​= 0.8Q, and the social marginal cost of production ​(​) isMC'= 1Q. If the government were to achieve the social optimum amount of production with an emissions fee, then what would be the optimal​ fee? The optimal fee would be____________ ​$ nothing per unit of output. ​(Enter a numeric response using a real number rounded to two decimal​ places.)

Answer 1

Answer:

240

Explanation:

The computation of the optimal fee per unit of output is as follows:

As we know that

Marginal cost = Price

MC = P

1Q = 2,400 - Q

1Q + Q = 2,400

2Q = 2,400

Q = 2,400 ÷ 2

= 1,200

MC = 0.8Q

= 0.8 (1,200)

= 960

Now the optimal fee per unit of output is

= 1,200 - 960

= 240