ECONOMICS W/CONNECT+20 >C<
20th Edition
ISBN: 9781259714993
Author: McConnell
Publisher: MCG CUSTOM
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Question
Chapter 4, Problem 4RQ
To determine
The production possibility frontier with public and private goods.
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Students have asked these similar questions
3. Suppose the production possibility frontier for an economy that produces one public
good (y) and one private good (x) is given by
x*+100y =5,000
This economy is populated by 100 identical individuals, each with a utility function of
the form
Utility = (x,y)2
where x,is the individual's share of private good production (=x/100). Notice that the public
good is nonexclusive and that everyone benefits equally from its level of production.
a. If the market for x and y were perfectly competitive, what levels of those goods
would be produced? What would the typical individual's utility be in this situation?
b. What are the optimal production levels for x and y? What would the typical
individual's utility level be? (Hint: The numbers in this problem do not come out
evenly, and some approximations should suffice.)
Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents
are trying to determine how large, in acres, they should build the public park. The following table shows each
resident's willingness to pay for each acre of the park.
Acres
1
2
3
4
5
6
7
Sophia
0 acres
O1 acre
2 acres
10
8
6
3
1
O3 acres
0
Willingness to Pay (Dollars)
Amber
Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to
split the cost of building the park equally. If the residents vote to determine the size of park to build, basing
their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the
largest park size for which the majority of residents would vote "yes?"
24
18
14
8
6
4
2
Cedric
6
5
4
3
2
1
0
The many identical residents of some cities love drinking apple juice. The cost of producing a
bottle of apple juice is $5, and the competitive suppliers sell it at this price. Each resident has
the following willingness to pay for the tasty refreshment:
Quantity
Willingness to Pay
(Dollars)
First bottle
10
Second bottle
8
Third bottle
6.
Fourth bottle
4
Fifth bottle
2
Further bottles
Chapter 4 Solutions
ECONOMICS W/CONNECT+20 >C<
Ch. 4.A - Prob. 1ADQCh. 4.A - Prob. 2ADQCh. 4.A - Prob. 3ADQCh. 4.A - Prob. 1ARQCh. 4.A - Prob. 2ARQCh. 4.A - Prob. 3ARQCh. 4.A - Prob. 1APCh. 4 - Prob. 1DQCh. 4 - Prob. 2DQCh. 4 - Prob. 3DQ
Ch. 4 - Prob. 4DQCh. 4 - Prob. 5DQCh. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - Prob. 8DQCh. 4 - Prob. 9DQCh. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Prob. 7RQCh. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7P
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Similar questions
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- 2. Consider a simple public good economy with two people and two goods: one public (x) and one private (y). Assume that one unit of public good can be produced with two units of private good. Person 1's utility function is u₁(x,y) = 2x¹2 + y₁ and Person 2's utility function is u2(x,y) = x¹2 + y₂. Consider the private good provision mechanism where Person 1 makes a contribution for the public good first, then Person 2 follows. a. Find the optimal output of the public good by using Samuelson condition. b. Show that in the private good provision mechanism Person 2 rides free. C. Is the private good provision mechanism efficient? Explain. Narrow_forward5. Suppose that Capsule Corporation and Red Ribbon Company are producers of spaceships. In their production processes, each firm emits 50 units of pollution. Now, the government wants to reduce smoke emissions by 40% by issuing tradable permits. The cost of abatement of Capsule Corporation is Php 50 per unit of pollution, while the cost of abatement of Red Ribbon Company is Php 30. Suppose the tradable permits sell at Php 40 and the government allocates the permits equally between the two firms. a. If Red Ribbon Company sells 10 permits to Capsule Corporation, what is the total cost in achieving the goal of reducing emissions by 40%? Instead of using tradeable permits, the government regulates the firms by forcing them to emit 30 units of pollution each. What is the total cost of this policy? What policy is more efficient to implement, the tradeable permits or the government regulation? b. c.arrow_forwardAcres 1 2 3 4 5 6 7 -$5 -$2 $0 F $2 Sophia $10 8 6 3 1 0 0 Amber $24 18 14 8 6 4 2 Cedric $6 5 4 3 2 1 0 Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equal. If the residents decide to build a park with size equal to the number of acres that maximizes total surplus from the park, how much total surplus will Sophia receive? 900127353arrow_forward
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