Parts c and e: Calculate the present worth of each year in the cash flow diagram
ID: 1135282 • Letter: P
Question
Parts c and e: Calculate the present worth of each year in the cash flow diagram individually (using the P=F*(P/f, i, n) and then sum them.
Spreadsheet is suggested I just have no clue where how to start.
Problem 2 (5 points). Externalities The social cost of electricity generated from coal is greater than the private cost. Answer the following questions given the hypothetical demand and supply curve equations below. Note part c-e should be exact values; provide the symbolic equation used. Remember to include units and proper significant figures to earn credit. The unit of price is cents per kWh and the unit of quantity is kWh/household/month. a) State if this scenario represents a positive or negative externality? b) For each equation below, label what each equation represents (marginal private benefit, c) What is the marginal external cost or marginal external benefit of this product (state d) State the equilibrium price and quantity. (Calculate the actual values and remember e) State the economically efficient price and quantity (if the market took into account marginal private cost, or marginal social cost) which of the two you are calculating and the exact value)? units) external costs and benefits). (Calculate the actual values and remember units) Equation 1: Price 32.5 - Quantity (0.023) Equation 2: Price - Quantity (0.010) 2.60 Equation 3: Price -Quantity (0.010) + 10.0Explanation / Answer
a. Private Cost is the cost incurred by the producer or supplier for providing goods or services.
Social Cost means the expense borne by the economy or society because of production of a particular good or service.
In short, Social Cost is the sum of Private Cost plus costs incurred during this process for which consumers are not compensated. i.e., External Cost(s).
Since Social Cost is greater than Private Cost, this is an example of Negative Externality.
b. After substituting 1as quantity, in all 3 Equations, we get the following Price:
1. 32.477 cents per KWH
2. 2.61 cents per KWH
3. 10.01 cents per KWH
After substituting 2 as quantity, we get the following Prices:
1. 32.454 cents per KWH
2. 2.62 cents per KWH
3. 10.02 cents per KWH
The first equation is Marginal Social Cost which keeps on decreasing as quantity increases as this is a Negative Externality.
The third equation corresponds to Marginal Private Benefit which increases at a much lower rate as quantity goes up. When quantity increases by 1 unit, benefit goes up by 0.09%.
The second equation is for Marginal Private Cost which rises by 0.381% for every 1 unit increase of production.
Note: Unable to see the spread sheet. Hence, cannot answer questions C,D & E.