Texarkana Electric Company burns coal to heat the water that drives its electricity-producing turbines. The table below shows the marginal benefit of annual electricity consumption and the private marginal cost of annual electricity production. Marginal Cost and Marginal BenefitQuantity (millions of megawatts) MBprivate MCprivate MCexternal MCsocial1.0 $145 $85 $ $ 2.0 130 90 3.0 115 95 4.0 100 100 5.0 85 105 6.0 60 110  Instructions: Enter your answers as a whole number. a. What is "private quantity" of electricity Texarkana Electric Company will produce each year?    million megawatts per year Now assume the production of each million megawatts of electricity also produces sulfur dioxide (a precursor to acid rain). The external cost of the sulfur dioxide is $20 per million megawatts of electricity production.  b. Fill in the external marginal cost (MCexternal) and the social marginal cost (MCsocial) columns in the table above. c. What is the socially optimal amount of electricity for Texarkana to produce if all costs and benefits are considered?      million megawatts per year

Marginal Cost and Marginal BenefitQuantity (millions of megawatts) MBprivate MCprivate MCexternal MCsocial1.0 $145 $85 $ $ 2.0 130 90 3.0 115 95 4.0 100 100 5.0 85 105 6.0 60 110  Instructions: Enter your answers as a whole number. a. What is "private quantity" of electricity Texarkana Electric Company will produce each year?    million megawatts per year Now assume the production of each million megawatts of electricity also produces sulfur dioxide (a precursor to acid rain). The external cost of the sulfur dioxide is $20 per million megawatts of electricity production.  b. Fill in the external marginal cost (MCexternal) and the social marginal cost (MCsocial) columns in the table above. c. What is the socially optimal amount of electricity for Texarkana to produce if all costs and benefits are considered?      million megawatts per year

A coal-fired power station produces electricity worth $40 per unit to consumers. However, for each unit produced air pollution is produced, costing $20, which is not reflected in the price of electricity paid by consumers. Suppose a Pigovian tax has been implemented to correct the market distortion. In the Social CBA the production of additional electricity should be priced at:

Amanda keeps bees to produce honey. Each hive produces $300 worth of honey each month. The table below shows Amanda’s marginal cost of tending each bee hive and her private marginal benefit, which is equal to the market value of the honey each hive produces. Marginal Cost and Marginal BenefitQuantity (hives) MCprivate MBprivate MBexternal MBsocial1 $100 $300 $ $ 2 200 300 3 300 300 4 400 300 5 500 300  Instructions: Enter your answers as a whole number. a. What is "private quantity" of hives for Amanda to tend?      hive(s) Now suppose that each of Amanda’s bee hives also provides pollination services to surrounding farms and that these services are worth $100 per hive per month.  b. Fill in the external marginal benefit (MBexternal) and the social marginal benefit (MBsocial) columns in the table above. c. What is the socially efficient number of hives for Amanda to tend if all costs and benefits are considered?      hive(s)

Now see the column for marginal cost. (Recall that MC=ΔTC/ΔQ.)What pattern do you see? Workers: 0, 1, 2, 3, 4, 5, 6, 7 Output: 0, 20, 50, 90, 120, 140, 150, 155 Total cost: 200, 300, 400, 500, 600, 700, 800, 900 Marginal cost: 0, 5, 3.33, 2.5, 3.33, 5, 10, 20

Marginal Cost and Marginal BenefitQuantity (hives) MCprivate MBprivate MBexternal MBsocial1 $100 $300 $ $ 2 200 300 3 300 300 4 400 300 5 500 300  Instructions: Enter your answers as a whole number. a. What is "private quantity" of hives for Amanda to tend?      hive(s) Now suppose that each of Amanda’s bee hives also provides pollination services to surrounding farms and that these services are worth $100 per hive per month.  b. Fill in the external marginal benefit (MBexternal) and the social marginal benefit (MBsocial) columns in the table above. c. What is the socially efficient number of hives for Amanda to tend if all costs and benefits are considered?      hive(s)