## Related questions with answers

The market for a particular chemical, called Negext, is described by the following equations.

Demand is given by:

$Q^{\mathrm{D}}=100-5 P$

Supply is given by:

$Q^S=5 P$

where Q is measured as units of Negext and P is price in dollars per unit.

Suppose that the government restricts emissions to 100 units of pollution. Graph the Negext market under this constraint. Find the new equilibrium price and quantity and show them on your graph. Compute how this policy affects consumer surplus, producer surplus, and the cost of pollution. Would you recommend this policy? Why?

Solution

VerifiedFor this item, we need to graphically present the 100-unit level of pollution restriction imposed by the government with respect to the level of pollution that Negext has produced before such policy has been implemented.

Furthermore, we also need to graph the new equilibrium price and quantity that Negext must employ, under such policy.

Lastly, after solving for the consumer surplus, producer surplus, total surplus, and the cost of pollution, we need to make a decision whether to repeal or accept such policy.

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