The private demand for drive-in movies is given by P = 20 - Q. The industry marginal cost of showing drive-in movies is given by MC = Q. a. Drive-in movies can be viewed imperfectly from outside the fence. The external marginal benefits (EMB) received by such viewers are given by EMB = 5-0.25Q. Graph the external marginal benefit curve, and then use that information to graph the social demand (SD) curve. Price SD 25 EMB 24 23 22 21 20 19 18 D 17 16 15 15 14 13 12 11 10 9 8 76543210 MC 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Quantity of drive-in movies ▲ DWL b. Suppose that all drive-in movies are nationalized and shown for the public good. The Movie Czar chooses the price and quantity of movies that bring the greatest benefit net of costs to all viewers, regardless of the vantage point from which they view the movie. The optimal quantity of drive-in movies is now approximately , and the optimal price is

The private demand for drive-in movies is given by P = 20 - Q. The industry marginal cost of showing drive-in movies is given by MC = Q. a. Drive-in movies can be viewed imperfectly from outside the fence. The external marginal benefits (EMB) received by such viewers are given by EMB = 5-0.25Q. Graph the external marginal benefit curve, and then use that information to graph the social demand (SD) curve. Price SD 25 EMB 24 23 22 21 20 19 18 D 17 16 15 15 14 13 12 11 10 9 8 76543210 MC 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Quantity of drive-in movies ▲ DWL b. Suppose that all drive-in movies are nationalized and shown for the public good. The Movie Czar chooses the price and quantity of movies that bring the greatest benefit net of costs to all viewers, regardless of the vantage point from which they view the movie. The optimal quantity of drive-in movies is now approximately , and the optimal price is

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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