Suppose a community is made up of ten thousand individuals, each of whom has an identical demand for clean air, as represented by the following inverse-demand function: P= 25 -,005Q A. Graph a representative individual's demand for clean air. Be sure to label axes, slope, and intercepts. B. Write the market demand function (equation in inverse-demand form) for clean air. Graph the market demand for clean air, being sure to label axes, slopes and intercepts. C. Solve mathematically for the free market quantity of clean air if MC - $100 (constant). Specify any necessary assumptions (state the free market condition) and show all work. D. Solve mathematically for the efficient quantity of clean air if MC = $100 (constant). Specify any necessary assumptions (state the efficient condition) and show all work. E. Why do the free market and efficient quantities differ?
Suppose a community is made up of ten thousand individuals, each of whom has an identical demand for clean air, as represented by the following inverse-demand function: P= 25 -,005Q A. Graph a representative individual's demand for clean air. Be sure to label axes, slope, and intercepts. B. Write the market demand function (equation in inverse-demand form) for clean air. Graph the market demand for clean air, being sure to label axes, slopes and intercepts. C. Solve mathematically for the free market quantity of clean air if MC - $100 (constant). Specify any necessary assumptions (state the free market condition) and show all work. D. Solve mathematically for the efficient quantity of clean air if MC = $100 (constant). Specify any necessary assumptions (state the efficient condition) and show all work. E. Why do the free market and efficient quantities differ?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose a community is made up of ten thousand individuals, each of whom has an
identical demand for clean air, as represented by the following inverse-demand function:
P = 25 -,005Q
A. Graph a representative individual's demand for clean air. Be sure to label axes,
slope, and intercepts.
B. Write the market demand function (equation in inverse-demand form) for clean air.
Graph the market demand for clean air, being sure to label axes, slopes and
intercepts.
C. Solve mathematically for the free market quantity of clean air if MC = $100
(constant). Specify any necessary assumptions (state the free market condition)
and show all work.
D. Solve mathematically for the efficient quantity of clean air if MC = $100 (constant).
Specify any necessary assumptions (state the efficient condition) and show all work.
E. Why do the free market and efficient quantities differ?
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