The local government has decided that because children's health has large external benefits, it will offer a subsidy to help familles payfor visits to the pediatrician. However, the government Isn't sure at what level to set the subsidy. The figure below shows the currentdemand curve for pediatricians' visits (D), and three alternative subsidies, represented by curves D2, D3, and D4.0Price (5)24022020018016014012010080604020D50 100 150 200 250 300 350 400 450 500Quantity of pediatrician visitsToolsADaO(A)D₂a. Assume that the correct level of subsidy is D3. Compared to the efficient outcome, graph the loss in total surplus that would resultfrom subsidies D₂ and D4-Instructions: Use the tools provided (D₂ and Da) to draw the loss in total surplus for each subsidyb. The socially optimal level of pediatrician visits isvisits,

A positive externality, in economics, occurs when an economic activity or transaction generates…

The local government has decided that because children's health has large external benefits, it will offer a subsidy to help familles 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 (D), and three alternative subsidies, represented by curves D2, D3, and D4- 0 Price (5) 240 220 200 180 160 140 120 100 BO 60 40 20 0 99 D D₂ 50 100 150 200 250 300 350 400 450 500 Quantity of pediatrician visits Tools A Da O A 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 Da) to draw the loss in total surplus for each subsidy 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 familles 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 (D), and three alternative subsidies, represented by curves D2, D3, and D4- 0 Price (5) 240 220 200 180 160 140 120 100 BO 60 40 20 0 99 D D₂ 50 100 150 200 250 300 350 400 450 500 Quantity of pediatrician visits Tools A Da O A 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 Da) to draw the loss in total surplus for each subsidy b. The socially optimal level of pediatrician visits is visits.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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