The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment: Quantity First bottle Second bottle Third bottle Fourth bottle Fifth bottle Further bottles Willingness to Pay (Dollars) 10 8 6 4 2 Each Whovillian will consume 0 The cost of producing a bottle of Zlurp is $3.50, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) bottles and receive a consumer surplus of $ Producing Zlurp creates pollution. Each bottle has an external cost of $1. Taking this additional cost into account, total surplus per person in the allocation you previously determined decreases to S Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by 1 bottle. Cindy's consumer surplus (ignoring the cost of pollution she experiences) is now S by S Mayor Grinch imposes a $1 tax on each bottle of Zlurp. .Her decision Consumption per person is now bottles. This yields a per-person consumer surplus of $ and government revenue of S person external cost of S this policy. (Hint: Total surplus is equal to consumer surplus minus the external cost of pollution plus government revenue.) not including the cost of pollution, a per- per person. Total surplus per person is now S as a result of because it total surplus in Whoville welfare compared to before the tax
The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment: Quantity First bottle Second bottle Third bottle Fourth bottle Fifth bottle Further bottles Willingness to Pay (Dollars) 10 8 6 4 2 Each Whovillian will consume 0 The cost of producing a bottle of Zlurp is $3.50, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) bottles and receive a consumer surplus of $ Producing Zlurp creates pollution. Each bottle has an external cost of $1. Taking this additional cost into account, total surplus per person in the allocation you previously determined decreases to S Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by 1 bottle. Cindy's consumer surplus (ignoring the cost of pollution she experiences) is now S by S Mayor Grinch imposes a $1 tax on each bottle of Zlurp. .Her decision Consumption per person is now bottles. This yields a per-person consumer surplus of $ and government revenue of S person external cost of S this policy. (Hint: Total surplus is equal to consumer surplus minus the external cost of pollution plus government revenue.) not including the cost of pollution, a per- per person. Total surplus per person is now S as a result of because it total surplus in Whoville welfare compared to before the tax
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment:
Quantity
First bottle
Second bottle
Third bottle
Fourth bottle
Fifth bottle
Further bottles
Willingness to Pay
(Dollars)
10
8
Each Whovillian will consume
The cost of producing a bottle of Zlurp is $3.50, and the competitive suppliers sell it at this price. (The supply curve is horizontal.)
6
4
2
0
Producing Zlurp creates pollution. Each bottle has an external cost of $1.
Taking this additional cost into account, total surplus per person in the allocation you previously determined decreases to S
Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by 1 bottle.
Cindy's consumer surplus (ignoring the cost of pollution she experiences) is now S
by S
Consumption per person is now
person external cost of 5
bottles and receive a consumer surplus of $
Mayor Grinch imposes a $1 tax on each bottle of Zlurp.
Based on your calculations, you
Her decision
bottles. This yields a per-person consumer surplus of $
and government revenue of $
this policy. (Hint: Total surplus is equal to consumer surplus minus the external cost of pollution plus government revenue.)
support the mayor's policy because it
total surplus in Whoville.
not including the cost of pollution, a per-
per person. Total surplus per person is now S
as a result of
welfare compared to before the tax..
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