Assume each gallon of gasoline that is produced gives rise to an external cost of $1.25. On any given day, the production of the 10,000 th gallon of gasoline entails a private value of $4.00 and a social cost of $3.50. What is the private cost of the 10,000 th gallon?

Question

Assume each gallon of gasoline that is produced gives rise to an external cost of $1.25. On any given day, the production of the 10,000 th  gallon of gasoline entails a private value of $4.00 and a social cost of $3.50. What is the private cost of the 10,000 th  gallon?

Janasa Hardy-Hardin · Accepted Answer

Final Answer : For each gallon, the social cost is equal to the sum of the private and external costs. Thus, the private cost of the 10,000 th  gallon is $3.50 - $1.25 = $2.25.

Assume each gallon of gasoline that is produced gives rise to an external cost of $1.25. On any given day, the production of the 10,000^th gallon of gasoline entails a private value of $4.00 and a social cost of $3.50. What is the private cost of the 10,000^th gallon?

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Assume each gallon of gasoline that is produced gives rise to an external cost of $1.25. On any given day, the production of the 10,000th gallon of gasoline entails a private value of $4.00 and a social cost of $3.50. What is the private cost of the 10,000th gallon?

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Learning Objectives

Learning Objectives

Related questions

Assume each gallon of gasoline that is produced gives rise to an external cost of $1.25. On any given day, the production of the 10,000^th gallon of gasoline entails a private value of $4.00 and a social cost of $3.50. What is the private cost of the 10,000^th gallon?