Consider an economy with three consumers, each with a = 10-q. What is society's marginal benefit (MSB) for the MSB = 10-3q MSB = 30-3q MSB 10-(1/3)q = OMSB = 30-(1/3)g
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- Define public goodsWhat is the economist’s definition of public goods? Why are public goods associated with market failure? How do the free rider problem and shirking contribute to this form of market failureConsider the market for flu vaccines, in which consumption causes positive externalities by creating herd immunity. Quantity supplied is given by Qs=2+2*P Marginal Private Benefit (determines individual demand of consumers of the vaccine i.e. the benefit from not getting sick) is given by Qd=60.5-2.5*MBP. Marginal Social Costs (MPC plus the benefits of externalities) is given by Qd=69.5-2.5*MSB. Plot these 3 curves on a graph with 6 points at P=11,12,13,14,15,16. What is the deadweight loss if only free-market forces are at play (i.e. externalities are not considered by the consumers)? How much should the subsidy be to bring the market to efficient equilibrium?
- Suppose that flu shots create a positive externality equal to $10 per shot. Further suppose that the government offers a $7-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced? Group of answer choices They are equal. The equilibrium quantity is greater than the socially optimal quantity. The equilibrium quantity is less than the socially optimal quantity. There is not enough information to answer the question.Using the above table, fill in the Marginal Social Benefit for a public good based on an economy of these 3 consumers. Consumer A’s price per unit Consumer B’s price per unit Consumer C’s price per unit Marginal Social Benefit QD $Blank 1 1 $11 $12 $15 $Blank 2 2 $9 $8 $12 $Blank 3 3 $6 $5 $9 $Blank 4 4 $5 $1 $5 If this public good has a constant marginal cost (MC) of $20, what is the socially optimal number of units of the public good that should be provided to the economy? Blank 5 units.Which of the following are examples of negative externalities? A. Reduced spread of COVID-19 and other infectious diseases from people physically distancing and wearing masks. B. Unsightly oil rigs offshore from Santa Barbara, diminishing the quality of the view for beachgoers and coastal homeowners. C. Reduced incidence of the common flu stemming from more people obtaining flu shots during the Fall. D. Reduced crime rates stemming from rapid economic growth and reduced unemployment. E. High gas prices caused by rapid demand growth in China. F. Job losses associated with a factory closure in the United States, because a factory was opened in Mexico to replace it. G. Noise from traffic on a busy street. H. Light pollution from cities making it more difficult for observatories to view distant stars. I. Noise pollution eminating from windmills on the North Shore of Oahu. J. Pollution emissions from power plants.
- Viral infections such as flu are highly contagious. The number of infections and thus the spread of the disease can be prevented by getting vaccinated. However, the decision to take vaccine is voluntary and some people choose not to go for it for various reasons.] [What type of externality occurs by getting vaccinated against contagious diseases? Explain your answer in 100 words or less. [In a diagram, show the market equilibrium quantity of the vaccine. Is the quantity also socially efficient? Explain in 100 words or less and demonstrate using the same diagram. [Suggest one method to achieve a socially efficient outcome. Explain your answer in 100 or less words.Consider agent A with (inverse) demand curve for the public good Pa = 60 - 2Qa and agent B with inverse demand Pb = 90 - 5Qb , where prices are measured in £ per unit. The marginal cost of producing the public good is £10 per unit. What is the Pareto efficient level of the public good? Explain. Illustrate in a graph.The equations below represent the demand and supply curves for annual gym memberships in a city. qD= 500 − 2p, qS=0.5p − 50 Because physical activity leads to better health, the city estimates that each annual gym membership saves $30 of public spending on healthcare per year (a positive externality). a. In a graph, show the market and the socially optimal equilibria for annual gym memberships in this city. Does the market equilibrium result in under- or over-consumption of memberships? What is the deadweight loss associated with the market failure in this situation? b. Would you recommend this city to implement a subsidy (a negative Pigouvian tax) to correct this market failure? If so, how much would be the subsidy per unit? What would be the effects of your proposed policy on the quantity, price, and aggregate welfare?
- Consider agent A with (inverse) demand curve for the public good PA = 60 − 2QA and agent B with inverse demand PB = 90 − 5QB, where prices are measured in £ per unit. The marginal cost of producing the public good is £10 per unit. What is the Pareto efficient level of the public good? Explain. Illustrate in a graph. [Hint: Compute the marginal social benefit of the public good by adding up the demand curves vertically, over the p’s]To what do market externalities lead? Group of answer choices Greater inefficiency in the market as it accounts for costs or benefits which encroach on third parties through activity in that market. Greater efficiency in markets as it ignores the benefits or costs which encroach on third parties through activity in that market Greater efficiency in markets as it accounts for costs or benefits which encroach on third parties through activity in that market. Greater inefficiency in the market as it ignores the benefits or costs which encroach on third parties through activity in that market.Scenario 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. Find the social demand curve for the public good in this neighborhood. What is the y-intercept of the social demand curve?