The figure below shows the market for higher education. The market demand curve for higher education reflects only the marginal private benefit (MPB) that individuals receive. Since this is a market with positive externalities, suppose the government provides a subsidy to consumers of higher education (students) that is equal to the marginal social benefit (MSB) minus the marginal private benefit (MPB), in this case, $8, 000 per student. With the subsidy, the demand curve will shift and become the same as the marginal social benefit (MSB) curve. Move the demand curve below to illustrate this shift. Be sure to take the exact size of the subsidy into account. Precise answers are required. Provide your answer below: 18 16- 14 S (MPC) 12 10 -8 Market Equilibrium (800,8) Social Equilibrium (800 8) -6 4- 2- D (MPB) 1400 1000 1200 Quantity (in thousands of college degrees) -200 0 200 400 600 800 16001800 Price (in thousands of $)

The figure below shows the market for higher education. The market demand curve for higher education reflects only the marginal private benefit (MPB) that individuals receive. Since this is a market with positive externalities, suppose the government provides a subsidy to consumers of higher education (students) that is equal to the marginal social benefit (MSB) minus the marginal private benefit (MPB), in this case, $8, 000 per student. With the subsidy, the demand curve will shift and become the same as the marginal social benefit (MSB) curve. Move the demand curve below to illustrate this shift. Be sure to take the exact size of the subsidy into account. Precise answers are required. Provide your answer below: 18 16- 14 S (MPC) 12 10 -8 Market Equilibrium (800,8) Social Equilibrium (800 8) -6 4- 2- D (MPB) 1400 1000 1200 Quantity (in thousands of college degrees) -200 0 200 400 600 800 16001800 Price (in thousands of $)

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

Suppose a new social service is introduced by a government at a fixed cost of $3,000 (note: there is no marginal cost to provide this service). This service has not been provided before and there is no available substitute for this service. Economists have estimated the marginal benefit of the new service is given by: MB = 100 – Q where Q is the quantity (in hours) of the service that is used. Please note the MB gives both the marginal private benefit (MPB) and marginal social benefit (MSB) (i.e., MB = MPB = MSB). The government imposes a price to ration use of the service to recover part of its costs. What price should be introduced to ration the use of the service to 50 hours? What is the net social benefit when the service charge is used? How does charging a price compare to providing it for free and/or rationing? Be Hint(s): similarly, think about measuring the area of consumer surplus and compare it to the governments cost. You may want to complete Q5 as you complete this…
Policymakers realize that, although education creates a positive benefit for those who obtain it, it also creates external benefits for the community where the educated individual resides. The graph depicts the marginal social cost (MSC) and the marginal social benefit (MSB) associated with education. On the graph, move the point, P, to the point representing the optimal level of education. Dollars (thousands) 100 90 80 70 60 50 40 30 20 10 0 0 2 4 MSC MSB 6 8 10 12 14 16 18 20 22 Years of schooling optimal schooling: 14 What is the socially optimal number of years of schooling for each citizen? years
The cost (supply) of each "unit" of NPR (National Public Radio) is P=9. Derek's valuation for each unit of NPR (demand) is given by Pp=20-2Q, and Kim's valuation is given by Pk=10-Q. The social valuation of NPR is Ps= Q. The socially optimal amount of NPR is units. Without intervention, the private market would lead to an 수 of NPR. Suppose the government decides to subsidize NPR in order to achieve the socially optimal amount of NPR. The total demand function is Qr= The appropriate subsidy is $ (include 2 decimals) per unit of NPR
In competitive markets, we know that: P= MWTP P= MC MC= AC P= Min AC Which result(s) implies that the outcome is socially optimal?
Let's consider the market for spaces in medical schools (for doctors, say). Suppose the demand for space is given by QD=120-0.5P where P is the price of attending medical school (in thousands of dollars). Also suppose the supply is given by Qs=0.5P. The equilibrium price in this market is The equilibrium quantity of spaces provided is Going to medical school provides a private benefit to the person attending (the future doctor). But, it also benefits the public in that there are more doctors available to provide healthcare. Therefore, this a market with ✓externalities. Suppose that the additional benefit to society from each space in medical school is 60,000 dollars. In this case, the efficient quantity of spaces (that which would most benefit society) is The goverment could achieve the socially efficient outcome by an amount of ✓dollars per space. ✓the schools that provide spaces
The demand and supply of ethanol are given by QD = 8,000 – 2,000P and QS = 1,000P – 1,000, where P is price per gallon and Q measures gallons per minute. Suppose the government subsidizes ethanol at $0.30 a gallon that the producer pays. What does the subsidy cost the government? After the subsidy, what is the producer surplus? After the subsidy, what is the consumer surplus? After the subsidy, what is the deadweight loss?
Consider a situation where Ron (R) and Nancy (N) have demands for a public good that can be represented by the following functions: D_R: Q R = 100-2P_R D_N: Q_N = 50-2P_N If Ron and Nancy are the only two consumers of this private good and the supply function for the good is: S: Q = -5 + P What is the social optimum quantity of the public good? Answer:
With the aid of examples or illustrations, show how cost-benefit analysis is linked to the following two welfare economic theory Externalities
Some economists think that gas taxes in Europe, averaging around $2.50 per gallon, are too high from the perspective of economic efficiency. Suppose that this is true, and that social welfare could be increased with slightly lower gas taxes. Present a welfare analysis graph of the gasoline market in Europe with a gas tax that is too high. Identify five areas in your graph: 1. Consumer surplus 2. Producer surplus 3. Externality damage 4. Tax revenues 5. The potential welfare gain if taxes were lowered to the "correct" level.
The graph shows the private supply and demand curves for spaceships in Spacelandia. The craft are quite popular, but unfortunately produce pollutants as a by-product when Spacelandians fly about. Suppose the government of Spacelandia places a per unit tax on the production of spaceships equal to the marginal damage cost (MDC). Demonstrate the effect of the tax by shifting the appropriate curve or curves. Supply Demand Quantity Price
You are given the following information for two hypothetical schools: Triton College can teach 15 Oceanography (OCN) courses OR 5 Political Science (POLI) courses, while Capitol University can teach 28 OCN courses OR 7 POLI courses. Assume that the faculty at each school is homogeneous. a. Which is more efficient at teaching OCN? b. Which is more efficient at teaching POLI? c. Suppose that Capitol University merges with Triton College to form Capitron Academy. Draw the PPF for Capitron Academy. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
The private market demand curve for flu shots is P = 100 - 4Q, and the supply curve for flu shots is P = 22 + Q where Q is a million shots per year and P is the dollars per shot. Assume that the flu shots generate an additional benefit in that it reduces the likelihood of others getting sick. This benefit is reflected in a social demand curve P 112-4Q. The private market equilibrium quantity of shots produced is optimal amount of shots is, but the socially Around 9 to 10 million shots.... Around 10 to 11 million shots Around 7 to 8 million shots.. Around 18 to 20 million shots Around 18 million shots ... Around 15 to 16 million shots Around 15 to 16 million shots ... Around 18 million shots