Suppose that the aggregat

Suppose that the aggregat

Suppose that the aggregate demand for fresh thanksgiving turkeys in Calgary is Q=72-P,where Q the number of thousands of turkeys, and P is the price per turkey. Assume there area number of turkey farms which supply the Calgary market, and that the aggregate supplycurve (Marginal cost curve) is P= Q/5. Make sure you use a diagram to answer question a),b) and c) below.a) (2 points) What is the competitive market equilibrium price? What quantity ofturkeys will be exchanged?b) (3 points) Now suppose that there are external costs (damages) associated withturkey production. One thousand turkeys produce one tonne of manure that pollutesthe ground water. If these marginal damages are included as part of the cost ofsupplying turkeys, the aggregate supply curve becomes P =Q/2. What are thesocially optimal levels of turkey production and manure? What is the sociallyoptimal price? How do the market price, and quantity of turkeys and manure, in a),compare with their socially optimal levels?2c) (4 points) How much would the net social value of turkey production increase if turkeyproduction were reduced from the competitive market equilibrium to the socially optimallevel?

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