Practice: Suppose that are two people considering purchasing a public good. For each quantitypurchased(Q), each individual gains a marginal benefit given by the following: Person 1:MB-12-Q.Person 2:MB2-24-2Q. The Marginal Cost of each unit of Qis given by MC-2QGiven the above, answer the following questions:a) If each person had to buy their own quantity of the public good how much would each person want topurchase? How much would end up being purchased privately? Q togetherb) Write down the Social Marginal Benefit Curve. What is the socially optimal equilibrium quantity?Now suppose for Part c that we are at the private market equilibrium. which is your answer from Part a.The government wants to step in and tax each of these individuals and use the raised revenue to purchaseanother unit of this good. Each individual can be taxed a different amountc) Propose a tax that will both (i) allow enough money to be raised for this additional unit of the publicgood and (ii) will make both Person 1 and Person 2 better off. How much will each of them pay?

Given that Marginal Benefit of Person 1 = 12 - QMarginal Benefit of Person 2 = 24 - 2QMarginal Cost,…

Answered: Practice: Suppose that are two people…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Consumers A, B, C, and D respectively have a willingness to pay of $130, $100, $80, and $50 for one widget. Firms W, X, Y, and Z each have capacity to produce one widget at respective costs of $10, $60, $90, and $110. If these are the only consumers and firms in this market, and there are no third party costs or benefits from widgets, what is the socially efficient quantity of widgets? 4 There is insufficient info to answer question 3 2
The following table shows how the marginal benefit of a service varies for five consumers. Quantity 1 2 3 4 Serkan 150 125 100 75 Asuman 125 100 75 50 Bahar 100 75 50 25 Murat 200 150 125 125 Meriç 600 400 200 150 Derive the demand curve for this service assuming that it is a public good. If marginal cost of the good is 850, what is the efficient output of the public good? If marginal cost of the good is 425, what is the efficient output of the public good? If marginal cost of the good is 850, what is the efficient output assuming it is private good?
Y10
The equations below represent the demand and supply curves for annual gym memberships in a city. qD= 500 − 2p, qS=0.5p − 50 Because physical activity leads to better health, the city estimates that each annual gym membership saves $30 of public spending on healthcare per year (a positive externality). a. In a graph, show the market and the socially optimal equilibria for annual gym memberships in this city. Does the market equilibrium result in under- or over-consumption of memberships? What is the deadweight loss associated with the market failure in this situation? b. Would you recommend this city to implement a subsidy (a negative Pigouvian tax) to correct this market failure? If so, how much would be the subsidy per unit? What would be the effects of your proposed policy on the quantity, price, and aggregate welfare?
This is an end-of-chapter problem that I'm struggling with! thanks!
Acres Willingness to Pay (Dollars) Sophia Amber Cedric 10 24 6. 8 18 3. 14 4 3 8. 3. 5. 1 6. 4 1 Consider the town of Springfield with only three residents: Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The following table shows each residents' willingness to pay for each acre of the park. Suppose the cost to build the park is $24 per acre. How many acres should the park be to maximize total surplus from the park in Springfield? O 4 acres О З асгes O 1 acre O 2 acres
Parks confer many external benefits on society: open space, trees that reduce pollution, and so on. Therefore, the market equilibrium quantity of parks is not equal to the socially optimal quantity. The following graph shows the demand for parks (their private value), the supply of parks (the private cost of producing them), and the social value of parks, including both the private value and external benefits. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.
5) Mr. Leon is at it again! He vandalized a public park. Now society has to clean it up. Based on the numbers below what would be the socially optimal amount that should be cleaned up? % cleaned total benefits total costs 25 $10,000 $1,000 50 $15,000 $4,000 75 $18,000 $7,000 100 $19,000 $10,000 *Show the marginal benefits and marginal costs, graphically.
Refer to Table 8-1 in Question 9. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally, as in Question 10. If the residents decide to build a park with size equal to the number of acres that maximizes total social surplus from the park, how much total surplus (i.e., net benefit) will Xavier receive? (enter just the number, no $)
3. Now reconsider the issue of soybeans from the perspective of Chinese consumers. Assume you are a Chinese consumer who drinks soymilk each day. Demonstrate using a graph how your consumption of soymilk differs from the socially optimal level. Is the price you pay for soymilk in current market conditions the correct amount, too high, or too low? Why? Ensure that you label your graph correctly (all curves, axes, price and quantities labeled). Show the deadweight loss of soymilk consumption, and what price should be charged for soymilk to move the amount of soymilk you drink to the optimal level.
E8
We recognize four types of goods, namely; private goods, public goods, club goods, and shared resources. Roads are an example of a public good. When the congestion gets worse, will the roads remain public goods or turn into club goods or common goods? Explain

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS