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The local government has decided that because children's health has large external benefits, it will offer a subsidy to help families pay for visits to the pediatrician. However, the government isn't sure at what level to set the subsidy. The figure below shows the current demand curve for pediatricians' visits (D1), and three alternative subsidies, represented by curves D2, D3 and D4.   a. Assume that the correct level of subsidy is D3. Compared to the efficient outcome, graph the loss in total surplus that would result from subsidies D2 and D4.   b. The socially optimal level of pediatrician visits is __ visits.

The local government has decided that because children's health has large external benefits, it will offer a subsidy to help families pay for visits to the pediatrician. However, the government isn't sure at what level to set the subsidy. The figure below shows the current demand curve for pediatricians' visits (D1), and three alternative subsidies, represented by curves D2, D3 and D4.   a. Assume that the correct level of subsidy is D3. Compared to the efficient outcome, graph the loss in total surplus that would result from subsidies D2 and D4.   b. The socially optimal level of pediatrician visits is __ visits.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The local government has decided that because children's health has large external benefits, it will offer a subsidy to help families pay for visits to the pediatrician. However, the government isn't sure at what level to set the subsidy. The figure below shows the current demand curve for pediatricians' visits (D1), and three alternative subsidies, represented by curves D2, D3 and D4.

 

a. Assume that the correct level of subsidy is D3. Compared to the efficient outcome, graph the loss in total surplus that would result from subsidies D2 and D4.

 

b. The socially optimal level of pediatrician visits is __ visits.

The local government has decided that because children's health has large external benefits, it will offer a subsidy to help families pay for visits to the pediatrician. However, the government isn't sure at what level to set the subsidy. The figure below shows the current demand curve for pediatricians' visits (D₁), and three alternative subsidies, represented by curves D2, D3, and D4- Price (S) 240 220- 200- 180- 160- 140- 120- 80- 60- 40- 20- 0 Quantity of pediatrician visits D₂ reset D₂ D₂ 50 100 150 200 250 300 350 400 450 500 D₁ D₂ a. Assume that the correct level of subsidy is D3. Compared to the efficient outcome, graph the loss in total surplus that would result from subsidies D₂ and D4 Instructions: Use the tools provided (D₂ and D4) to draw the loss in total surplus for each subsidy. b. The socially optimal level of pediatrician visits is 350 visits.
Transcribed Image Text:The local government has decided that because children's health has large external benefits, it will offer a subsidy to help families pay for visits to the pediatrician. However, the government isn't sure at what level to set the subsidy. The figure below shows the current demand curve for pediatricians' visits (D₁), and three alternative subsidies, represented by curves D2, D3, and D4- Price (S) 240 220- 200- 180- 160- 140- 120- 80- 60- 40- 20- 0 Quantity of pediatrician visits D₂ reset D₂ D₂ 50 100 150 200 250 300 350 400 450 500 D₁ D₂ a. Assume that the correct level of subsidy is D3. Compared to the efficient outcome, graph the loss in total surplus that would result from subsidies D₂ and D4 Instructions: Use the tools provided (D₂ and D4) to draw the loss in total surplus for each subsidy. b. The socially optimal level of pediatrician visits is 350 visits.
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