The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment:
a. The cost of producing Zlurp is $150, and the competitive suppliers sell it at this
b. Producing Zlurp creates pollution. Each bottle has an external cost of $1. Taking this additional cost into account, what is total surplus per person in the allocation you described in part (a)?
c. Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by one bottle. What happens to Cindy’s welfare (her consumer surplus minus the cost of pollution she experiences)? How does Cindy’s decision affect total surplus in Whoville?
d. MayorCrinch imposes a $1 tax on Zlurp. What is consumption per person now? Calculate consumer surplus, the external cost, government revenue, and total surplus per person.
e. Based on your calculations, would you support the mayor’s policy? Why or why not?
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Chapter 10 Solutions
EBK ESSENTIALS OF ECONOMICS
- Let the supply and demand for widgets be given by the following schedule. Price: 3, 4, 5, 6, 7, 8, 9, 10, 11 Quantity Supplied: 100, 200, 300, 400, 500, 600, 700, 800, 900 Quantity Demanded: 900, 800, 700, 600, 500, 400, 300, 200, 100 a. What quantity will be produced here? b. What quantity is efficient if there are no external costs or benefits? c. What quantity is efficient if there is an external cost of $6 per unit from pollution caused by the widget factories?arrow_forwardThe United States government subsidizes many so-called green companies. For instance, it has given millions of dollars to solar panel companies. In the market for solar power, illustrate what the government subsidies mean.arrow_forwardThe many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment: First bottle Second bottle Third bottle Fourth bottle Fifth bottle Further bottles $14 $4 The cost of producing Zlurp is $1.50, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) Producing Zlurp creates pollution. Each bottle has an external cost of $1. Taking this additional cost into account, what is total surplus per person? $8 $5 $4.5 3 2arrow_forward
- There are four hospitals (consumers in this example) willing to pay the following amounts for a ventilator: Hospital W Hospital X Hospital Y Hospital Z $110,000 $50,000 $15,000 $60,000 There are producers that can produce at most one ventilator each and at the following costs: Producer A Producer B Producer C Producer D $15,000 $30,000 $55,000 $10,000 What is the most surplus that can be realized if only one ventilator can be produced? Which firm should produce it, and which hospital should consume it? If only one ventilator can be produced, it should be made by Producer and consumed by Hospital resulting in a maximum surplus of $ (Enter your answer as a whole number.)arrow_forwardIf the daily demand curve for gasoline is as provided in the following graph, then how much consumer surplus would consumers receive if the market price for gasoline was $1.60 per litre? What about for a price of $1.20 per litre? Price ($ per litre) $3.00 $1.60 $1.20 040 120 200 280 Demand 360 440 Quantity of gasoline (millions of litres)arrow_forwardExplain the social efficiency by taking into account consumer surplus and producer surplus.arrow_forward
- Ryan would be willing to pay $1 for a lollipop. Sarah would be willing to pay $0.50. The price of the lollipop is $0.75. What is Ryan and Sarah's combined consumer surplus? a. $0 b. $0.25 c. $0.50 d. $0.75 Can someone please explain to me why the correct answer here is $0.25? I did the calculations and i keep getting $0 the follwing is my calculationsarrow_forward#4arrow_forwardFour roommates are planning to spend the weekend watching movies on demand. Here is their willingness to pay for each film: Judd Joel Gus $3 Tim First film Second film Third film Fourth film Fifth film $7 6. 5. $5 $2 3 2. 1 3. Suppose it costs $10 to rent a movie. In order to maximize total surplus (willingness to pay less total cost), they should rent movies. If they spit costs equally, Judd's surplus will be . whereas Tim's will be Which element of Arrow's Impossibility Thoerem was violated in the previous example? The Pareto Criterion Transitive (Non-Cyclical) Preferences The Independence of Irrelevant Alternatives The Minimal Liberalism Criterionarrow_forward
- The figure shows the pizza market. A) If the price of a slice of 4-point pizza is $3, what is the consumer surplus of the 50th slice? B) If the price of a slice of pizza is $3, what is the producer surplus for the 50th slice of pizza? C) What is the efficient quantity? What is the equilibrium quantity? What is the loss when the equilibrium quantity is produced?arrow_forwardConsider Good A. There are NO externalities associated with Good A. a.) Draw a ( general- you don’t need any specific numbers) graph that shows the deadweight loss that would result if a tax is placed on Good A. b.) Suppose that, after the tax is placed on Good A, the quantity consumed ( by all customers) is equal to 90,000 units of Good A. Is the efficient level of output in the market for Good A greater than 90,000 , less than 90,000 , or equal to 90,000 ( just circle your answer ; you don’t have to explain)? (7) The efficient level is greater than 90,000 The efficient level is less than 90,000 The efficient level is equal to 90,000arrow_forward2arrow_forward
- Principles of MicroeconomicsEconomicsISBN:9781305156050Author:N. Gregory MankiwPublisher:Cengage Learning