The diagram to the right depicts the market for cough medicine in a small town. The quantity of cough medicine ismeasured in bottles sold per week; price is measured in dollars. The townspeople are happier and healthier becausepeople who have colds and flus buy and take the medicine and reduce the spread of infection. Note that demand curveD, represents the marginal private benefit of cough medicine, market equilibrium occurs at (20, $14), the cost of the$28-$24-externality per bottle is $3, and the socially optimal equilibrium occurs at (24, $15). What is the deadweight loss due to theexternality?S$20-.....The value of the deadweight loss due to the externality is $$16-$15(Round to the nearest dollar as needed.)$14$12-$8-$4-20 24DA$0-102030405060

Deadweight loss arises when less than or greater than socially efficient quantity is produced. The…

Answered: The diagram to the right depicts the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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There are two consumers of mosquito abatement (a public good), Dave and Lilly. Dave’s benefit from mosquito abatement is given by ??? = 100 − ?, where Q is the quantity of mosquito abatement. Lilly’s benefit is given by ??? = 60 − ?.a. Calculate the total marginal benefit, ???.b. Suppose that mosquito abatement can be provided at a marginal cost of ?? = 2?. Find the socially optimal level of abatement. c. If mosquito abatement is privately supplied, what quantity will be supplied by Dave, and what quantity will be supplied by Lilly? Briefly explain.
Refer to the diagrams below in which figures (a) and (b) show demand curves reflecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it. If the marginal cost of the optimal quantity of this public good is $6, the optimal quantity must be: $12 10 Alvin (a) 4. 2. 4. $12 10 Elmer 6. 4. (b) 2.
Suppose the demand for a product is P = 400 - 0.25 Q and the supply of the product is P = 100 +0.75 P where Q is output and P is price. Suppose also that the marginal external cost (MEC) from production is constant and equal to 50$ per unit. What is the competitive (private) efficient level of output? What is the socially efficient level of output?
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.
Assume D1 reflects private benefits from consumption and assume S1 reflects private costs of production. If we begin with demand curve D1 and supply curve S1 in the figure above and external costs are incorporated into this market, then Group of answer choices government should subsidize its production and shift supply from S1 to S2. the vertical distance between S1 and S2 equals external costs. price will increase from P1 to P4. underproduction equals Q3 minus Q1. price will rise from P1 to P3.
According to marginal analysis, in a market that experiences a positive externality, the market (private) players would ________________________ to the socially optimal output level. A. over-produce an output level relative B. under-produce an output level relative C. exactly produce an output level equal
The following graph shows the demand (marginal private benefits) and supply (marginal private costs) curves for a good. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. Suppose that a negative externality arises as a result of the production of this good. Adjust the following graph by shifting one of the curves to reflect the presence of the negative externality. PRICE AND COST greater less The market output is greater QUANTITY Supply Demand than the socially optimal output. Demand Supply (?
7.
Air horns impose many external costs on society: the risk of being deafened, the annoyance of being awakened in the middle of the night, and so on. Therefore, the market equilibrium quantity of air horns is not equal to the socially optimal quantity. The following graph shows the demand for air horns (their private value), the supply of air horns (the private cost of producing them), and the social cost of air horns, including both the private cost and external costs. 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.
6. A paper mill discharges chemicals into a river that washes the shores of a downstream resort area. The private cost, social cost, and marginal benefit associated with the production of paper are given by the following equations: PMC = 5 + Q, SMC = 10 + 2Q, and MB = 35 -0.5Q. a. Provide a labelled diagram to illustrate how the competitive free market will not produce the socially optimal amount of output. b. Illustrate the efficiency loss. C. Illustrate how a per-unit tax could be used to correct this problem.
Suppose an unvaccinated man Tom would get $10 of private benefit out of a flu shot. The flu shot costs $20 at the local clinic. The herd immunity benefit of the shot is worth an additional $15 to Tom's friends and co-workers. (1) What is the private cost incurred when Tom gets the shot? (2) Is it privately efficient for Tom to get the shot? (3) What is the public or social cost incurred when Tom gets the shot? (4) What is the public or social benefit when Tom gets the shot? (5) Is it publicly/socially efficient for Tom to get the shot? Hint: please consider only the information provided in the question. Any other potential cost or benefit can be ignored. Please explain your answers. Do not simply provide a Yes or No as the answer. If it involves calculations, show your steps.

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