In the absence of government intervention, find the equilibrium price (PC) and Quantity (QC) being exchanged in the antifreeze market?
Suppose you are a public official responsible for setting a retail disposal charge on antifreeze. Estimated marginal benefit and cost functions for antifreeze are as follows:
MPB = 10.0 – 0.5Q MPC = MSC = 1.0 + 0.4Q
MSB = 10.0 –1.1Q,
whereMPB, MSB, and MPC are measured in dollars per gallon, and Q is in millions of gallons.
In the absence of government intervention, the market reaches equilibrium where MPB and MPCare equal, found as follows:
MPB = MPC
10.0 – 0.5Q = 1.0 + 0.4Q
9.0 = 0.9Q
? QC = 10 million gallons of antifreeze
PC = 10.0 – 0.5(10) or 1.0 + 0.4(10)= $5 per gallon
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