(2) (3) Maximum Actual Price (4) Price Willing to Pay (Equilibrlum Price) (1) Consumer Person Surplus Bob $13 $8 $5 (= $13 – $8) Barb 12 8 4 (= $12 – $8) Bill 11 8 3 (= $11 - $8) Bart 10 8 2(= $10 - $8) Brent 8 1=$ 9- $8) Betty 8 8 OE$ 8- $8) Producer Surplus (2) (3) Minimum Actual Price (4) (1) Acceptable (Equilibrlum Price) Consumer Person Price Surplus Carlos $3 $8 $5 (= $8 – $3) Courtney 4 8 4 = $8 – $4) Chuck 8 3= $8 – $5) Cindy 6 8 2= $8 – $6) Cralg 7 8. 1= $8 – $7) Chad 8. 8 OE $8 – $8)
Look at Tables , which show, respectively, the
a. What are the equilibrium price and quantity for the data displayed in the two tables?
b. What if, instead of bags of oranges, the data in the two tables dealt with a public good like fireworks displays? If al the buyers free ride, what will be the quantity supplied by private sellers?
c. Assume that we are back to talking about bags of oranges (a private good), but that the government has decided that tossed orange peels impose a negative externality on
the public that must be rectified by imposing a $2-perbag tax on sellers. What is the new equilibrium price and quantity? If the new equilibrium quantity is the optimal quantity, by how many bags were oranges being overproduced
before?
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