Answered: First bottle $5 Second bottle Third…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Question

The many identical residents of Whoville love drinking zlurps. Each of the residents has the following willingness to pay for the tasty refreshment.

a. The cost of producing Zlurp is $150, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) How many bottles will each do Whovillian consume? What is each person's consumer surplus?

b.Producing Zlurp creates pollution. Each bottle has an external cost of $1.Taking this additional cost into account, what is total surplus per person in the allocation you described in part (a)?

c. Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by one bottle. What happens to Cindy's welfare (her consumer surplus minus the cost of pollution she experiences)? How does Cindy's decision affect the total surplus in Whoville?

d. MayorCrinch imposes a $1tax on Zlurp. What is consumption per person now? Calculate consumer surplus, the external cost, government revenue, and total surplus per person.

e. Based on your calculations, would you support the mayor's policy? Why or why not?

First bottle
$5
Second bottle
Third bottle
Fourth bottle
Fifth bottle
Further bottles
1

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Follow-up Questions

Read through expert solutions to related follow-up questions below.

Follow-up Question

ayor Grinch imposes a $1 tax on each bottle of Zlurp.

Consumption per person is now

bottles. This yields a per-person consumer surplus of

not including the cost of pollution, a per-person external cost of

, and government revenue of

per person. Total surplus per person is now

as a result of this policy. (Hint: Total surplus is equal to consumer surplus minus the external cost of pollution plus government revenue.)

Based on your calculations, you support the mayor's policy because it welfare compared to before the tax.

Solution

by Bartleby Expert

SEE SOLUTION

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions