Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 16, Problem 2.4P
To determine
The potential level of output and the price charged for B and E.
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Chapter 16 Solutions
Principles of Economics (12th Edition)
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- There are three individuals in society, named A, B and C. The individuals' inverse demand curves for a public good are PA = 20 - 3Q, PB = 35 - 5Q and PC = 45 - Q, and the social marginal cost curve for the public good is given by SMC = Q. What is the optimal amount of the public good? a) 1 b) 9 c) answer 10 d) 100 , show me the method.arrow_forwardSuppose there are three consumers of a public good with the following marginal benefits of consumption related to the quantity of the public good provided: Consumer 1: MB1 = 5 – 2Q Consumer 2: MB2 = 4 – Q Consumer 3: MB3 = 3 – Q Calculate and draw the total marginal benefit function of the public good in a fully labelled diagram. If the marginal cost of producing the public good is MC = 2Q, what is the efficient quantity and how much should each consumer contribute to its provision if it were to provided at the efficient level (assuming the non-rival and non-excludable problems could be resolved)?arrow_forwardConsider a competitive market for Good Y. This good involves a negative consumption externality. i) Is this market efficient? Why? ii) Imagine that the competitive market for Good Y consolidates and becomes a monopoly. Does this make the market more, or less efficient relative to the situation above? Include a graph to make the point clearer.arrow_forward
- I need some help drawing the curve for p1+p2+p3arrow_forwardSuppose there are two residents in a neighborhood, and you know both of their demand curves for a public good. What would you have to do in order to figure out what the social demand curve? a-Subtract the demand of the person with the higher valuation of the public good from the demand of the person with the lower valuation of the public good b-Add their demand curves together c-Multiply the two demand curves together d-Subtract the demand of the person with the lower valuation of the public good from the demand of the person with the higher valuation of the public goodarrow_forwardScenario 3 Suppose there are one hundred residents in a neighborhood, and each resident has an identical demand for a public good. The demand for each resident is given by P = 2 - .01Q. If your answer is not a whole number, please make sure to round to the nearest hundredth. Refer to Scenario 3. What is the socially optimal number of the public good if the marginal cost of producing them is $100, $5 and $300?arrow_forward
- What would happen if the government subsidized consumption of this product because it has positive externalities in consumption?arrow_forwardBicycle paths are public goods that can be supplied at cost C = 10Q + Q2 where Q measures kilometers of bicycle paths. There are only two people in this city Mr. A and Ms. B. Describe the free-rider problem associated with the supply of this good. Suppose that demand is given by QA = 50 ‒ 0.5P and QB = 25 ‒ P. Find the efficient quantity of paths. Provide a fully labeled demand curve diagram. Calculate the cost of supplying the efficient quantity and suggest how this cost might be recovered from the two consumersarrow_forwardSuppose that there is an unregulated market for pesticides. When the factories produce pesticide, they also create waste that they dump into a lake on the outskirts of town. The market for pesticides is given by the following equations (note that Q is in tons, and P is in 1000s of dollars: Demand: P = 8 – Q Supply: P = Q Marginal Social Cost: P = 2 + Q Now suppose the government levies a pollution tax. What is the tax per ton of pesticide that will achieve the socially efficient outcome? If the production of pesticides at any level produces pollution, why is the socially optimal quantity not zero?arrow_forward
- Because the free market (competitive) equilibrium maximizes social efficiency, why would the government ever intervene in an economy?arrow_forwardThere are three consumers of a public good. Their individual demands are as follows: P1 50 – G P2 110 – G P3 150 – G, where G measures the number of units of the good and p; is the price in dollars. MSC of the public good is $190 per unit. What is the optimal level of provision of the public good according to the Samuelson condition?arrow_forwardCan you answer this?arrow_forward
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