c) Suppose that the demand for good Q is by 2 groups and given by: Q1=45-0.2P1 Q2=15-0.2P2 =2Q² And that the cost function for the same good is given as; Cost = Find the equilibrium levels of price and quantity when the good is private good and when the good is a public good i) Present the answer above in well labeled graphs Show by way of calculation the free riding ii) iii)

c) Suppose that the demand for good Q is by 2 groups and given by: Q1=45-0.2P1 Q2=15-0.2P2 =2Q² And that the cost function for the same good is given as; Cost = Find the equilibrium levels of price and quantity when the good is private good and when the good is a public good i) Present the answer above in well labeled graphs Show by way of calculation the free riding ii) iii)

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: Public Goods And Common Resources

Section: Chapter Questions

Problem 2PA

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8: Consider the market for alcohol. The demand for alcohol is given by the inverse demand function p = 1500 – 10Q The market cost function for firms that sell alcohol is C"(Q) = 300Q + 10Q² Alcohol consumption sometimes produces negative externalities, such as drunk driv- ing, health costs, or violent behavior. The social cost of these externalities is C°(Q) = 5Q? %3D Note that both CP(Q) and C9(Q) are cost functions, not marginal cost functions. (3) How much deadweight loss is there at the competitive equilibrium? Draw a graph to support your answer. (4) Now suppose there is a monopolist that sells alcohol. How much is produced by the monopolist? Is an unregulated competitive market or an unregulated monopolist better (in terms of social welfare) in this case?
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Draw a graph that models a positive externality in consumption (label and clearly explain graph) Explain: i) The difference between the competitive equilibrium quantity and the socially optimal level quantity. ii) A possible intervention to bring the competitive equilibrium quantity closer to the socially optimal quantity. iii) An example of a setting in which this type of externality might occur (explain clearly how/why this externality happens).
11-) Andrew, Beth, and Cathy live in Lindhville. Andrew’s demand for bike paths, a public good, is given by Q = 12–2P. Beth’s demand is Q = 18–P, and Cathy’s is Q = 8–P/3. The marginal cost of building a bike path is MC = 21. The town government decides to use the following procedure for deciding how many paths to build. It asks each resident how many paths they want, and it builds the largest number asked for by any resident. To pay for these paths, it then taxes Andrew, Beth, and Cathy the prices a, b, and c per path, respectively, where a + b + c = MC. (The residents know these tax rates before stating how many paths they want.)A-). If the taxes are set so that each resident shares the cost evenly (a = b = c), how many paths will get built?B) Show that the government can achieve the social optimum by setting the correct tax prices a, b, and c. What prices should it set?
Please help and explainAssume a water market, and let MB denote the marginal benefit from spraying fertilizers while MC denotes the marginal cost. That is, MB = 10 - q, and MC = 3/2 q where q denotes total pollution generated.The state government would like to define the rights to the underground water and set an institution that will lead to pollution regulation. 1. Use a figure to depict the competitive outcome. Derive the competitive equilibrium outcome. What is the net benefit, net cost, and the equilibrium amount of pollution generated, i.e., q?2. Use a second figure to explain how well-defined property rights can create a market for the pollution and internalize fertilizer's social cost. Separate the analysis to two different institutions and assume surpluses are distributed evenly between the polluter and pollutee:1. The cotton producer, who is also the polluter, has the right to pollute and the ownership of the underground water.2. Assume the dairy farmer, who is the pollutee,…
5. Public Goods Consider 2 individuals, Arrow and Becker, who have the following demand curves respectively for parks respectively, and face a marginal cost curve below. QA =4- PA; QB =4-2PB; MCq=1. Here P is the price of a park, Q is the quantity, and A represents Arrow and B represents Becker. The price for other goods is 1. a) First, consider the scenario that the parks are private goods, similar to private gardens. How many parks will Arrow and Becker choose? What is the price of the parks in the market? b) Now suppose the parks are public goods, write down the Samuelson condition. What is the social efficient provision of the public good? Suppose Arrow chooses the amount of the parks to provide, but he cannot exclude Becker from enjoying the parks he provides. How many parks will he choose? Compare your result with part b), what is the implication here? d) We still ask Arrow to determine the number of parks. Suppose the government has provided 1 unit of parks for the public. That…
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2. Given the demand function of motorcycle: Q = 500 – 100P where Q is total quantity demanded (unit: 10,000) and P is daily price (in unit of US$). (1) If the current daily price is US$1.0, please find the total quantity demanded. (2) If the external costs of motorcycle ($2) are all internalized, what would be the total quantity demanded? (3) Please also discuss impacts of this internalization policy on supply, demand and public infrastructures.
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