The following graph shows the market for magic wands in a fictional country of Buranda. Suppose that citizens of Buranda realized that the equipment used in production of magic wands creates noise above 70 dB, which over a prolonged period of time is harmful for people's hearing. Suppose that the harm is estimated at $3 per magic wand. Based on the graph, if 5 magic wands are produced, they are valued at $ whereas the social cost is equal to $ This means the market outcome is Suppose the government of Buranda imposes a tax equal to $3 per magic wand in an attempt to make producers of magic wands to internalize the cost to society.

Suppose that a forest contains a population of elk. Individual hunters living nearby can decide whether or not to hunt the elk on a given day. The variable cost of hunting is $30 per day and elk meat sells for $1 a pound. Based on the information in the table, answer the following questions. a) What is the efficient number of hunters? b) How many would hunt if there were no restrictions placed on hunting? # of hunters 0 1 2 3 4 5 6 7 8 Total 0 40 114 144 170 180 160 Elk meat (pounds/day) Average 40 40 36 34 25 20 Marginal 40 34 26 10 -5 -15

Imagine a small town, in which only two residents, Tony and Jill, own wells that produce water for safe drinking. Each Saturday, Tony and Jill work together to decide how many gallons of water to pump, bring the water to town, and sell it at whatever price the market will bear. Meanwhile, suppose that it costs $1/gallon for Tony &Jill to pump & deliver water to the customer: i.e., the marginal cost, MC = $1. The weekly town demand schedule and total revenue schedule for water is reflected in the table below. Note: Price (P) is a function of the weekly market quantity (Q): i.e., P = 13 – 0.1 Q Total Marginal Total Marginal Cost Revenue Revenue Quantity (Q) Price Cost Profit (P) (TR) (MR) (TC) (MC) (TT) 13 N.A N.A 10 12 120 12 10 1 110 20 11 220 10 20 1 200 30 10 300 1 40 1 50 8 60 7 70 6 1 80 1 90 4 1 100 3 1 110 220 1 120 1 120 1 130 -12 130 1 -130 (1) Complete the above table by filling all blanks. (2) As long as Tony and Jill operate as a profit-maximizing monopoly, what will the…

Suppose there are only two fishermen, Maria and Ruby, who fish along a certain coast. They would each benefit if lighthouses were built along the coast where they fish. The marginal cost of building each additional lighthouse is $100. Maria’s demand curve for lighthouses is given by P=170-2Q, and Ruby’s by P=150-Q, where Q is the number of lighthouses. Explain why we might not expect to find the efficient number of lighthouses along this coast. Draw the demand curve for Maria and Ruby individually and the market demand for lighthouses. What is the efficient number of lighthouses?