The graph below depicts a schedule of two individual marginal benefit curves (MB1 and MB2) as well as the social marginal benefit (SMB) curve. This good is non-rival in consumption and non- excludable in use, so the SMB was constructed using vertical summation of individual MB curves. Which of the following are TRUE? $20 $15 $13 a b d Q1 Q2 f Q3 SMB MB2 MBI Quantity O b. If the social marginal cost is $20 per unit, then Q2 is the output level that maximizes social net benefit. Oe. None of the above are true. O d. Only b and care true OcThe social marginal benefit of the Q1st unit is $28. a It must be the case that Q1+02-03,

The graph below depicts a schedule of two individual marginal benefit curves (MB1 and MB2) as well as the social marginal benefit (SMB) curve. This good is non-rival in consumption and non- excludable in use, so the SMB was constructed using vertical summation of individual MB curves. Which of the following are TRUE? $20 $15 $13 a b d Q1 Q2 f Q3 SMB MB2 MBI Quantity O b. If the social marginal cost is $20 per unit, then Q2 is the output level that maximizes social net benefit. Oe. None of the above are true. O d. Only b and care true OcThe social marginal benefit of the Q1st unit is $28. a It must be the case that Q1+02-03,

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter6: Population Health

Section: Chapter Questions

Problem 8QAP

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Define social benefit.
You are about to sign-up for a movie streaming service and are trying todecide how many movies you should subscribe to. Each movie you stream costs $4.00. How many movies should you watch based on the table below, which represents the marginal benefits of streaming a certain amount of movies?Movies Streamed Marginal Benefit1 $7.002 $5.503 $4.504 $3.505 $2.006 $1.50
There are 500,000 people in Merageville. Each one of them enjoys hikes through the forest at the edge of town. The city council has just sold this land to a developer for $io million a. Suppose that each person values access to the forest at $25. What is the Pareto efficient use of the land? Be precise in your description of why it is Pareto efficient. b. Given this, why is it likely that the Pareto efficient outcome is probably not going to happen? c. Given this, what is the role of government in bringing about Pareto-efficiency?
Draw a graph that models a positive externality in consumption (label and clearly explain graph) Explain: i) The difference between the competitive equilibrium quantity and the socially optimal level quantity. ii) A possible intervention to bring the competitive equilibrium quantity closer to the socially optimal quantity. iii) An example of a setting in which this type of externality might occur (explain clearly how/why this externality happens).
Draw the following situations as a graph format: 1. The graph will have the price (P) on the y-axis and quantity (Q) on the x-axis. The demand or marginal private benefit curve (PMB) will be the same as the social marginal benefit (SMB) curve and it is sloping downwards. The PMC will be lower than the SMC and upward sloping. The social optimal is where SMC and PMB meet and at this point, the P is higher and Q is lower than the P where PMC and PMB meet. Since there is no restriction, the firm produces where PMC and PMB meet. 2. The graph will have the price (P) on the y-axis and quantity (Q) on the x-axis. The Deadweight Loss (DWL) is captured by the triangular area whose height is the gap between the social output and the firm’s output and base is the external cost (point on SMC where the firm is producing minus the point where PMC=demand).
Suppose a consumer consumes a carbon-intensive good and a carbon-neutral good. Using a diagram, show how a carbon tax and dividend will affect the consumer’s budget line.
a. According to Economist Vilfredo Pareto, a condition of ‘Pareto Optimality’, which refers to efficient allocation of natural resources such that no reallocation of resources of such could benefit any person without lowering the net benefits for at least one other person, cannot be attained in the presence of Externalities. Explain how externalities affect the condition of Pareto Optimality using suitable examples of each type of the externalities.
Why is the equality between the marginal benefit and marginal cost of an action an equilibrium condition in economics? No more than 3 lines
Q.2 How can we achieve pareto efficient allocation in case of consumption externality? Explain with an example.
Q.3. Externalities I Perhaps ironically, air conditioners produce heat as a waste product (to say nothing of any externalities from energy consumption). Air conditioner’s waste warm up nearby outdoor areas. This effect can be substantial in dense cities. Suppose that the following are the benefits/ costs from running an air conditioner on a 90 degree day (Q is the temperature reduction enjoyed by the consumer of the air conditioning): MPB=MSB=30-Q MPC=10 External Cost=5 a) Graph the private/social marginal benefit/cost curves described above. b) Determine the market equilibrium consumption of Q. c) Determine the socially optimal consumption level of Q. d) Calculate the consumer/producer surplus in b) and c). Calculate the deadweight loss in each, if applicable. e) What is the deal with producer surplus? f) Determine the tax that will yield the socially optimal consumption level. What is the revenue generated by the tax?
3. The Centers for Disease Control and Prevention (CDC) has a new vaccine against a disease and are trying to determine the optimal percentage of the population that should be vaccinated. They do not recommend vaccinating the whole population against the smallpox virus because the vaccine has undesirable, and sometimes fatal, side effects. Suppose the following table gives the data about the effects of the vaccine. a. Calculate the Marginal Benefit (in terms of how many extra lives are saved by the vaccine) and the marginal cost (in terms of how many extra lives are lost due to side effects) of each 10% increment of the vaccination. Write your answers on the appropriate columns above. b. Using marginal thinking, determine the optimal percentage of the population that should be vaccinated. Explain your answer.
Assume a market for fertilizers, and let D denote the demand of fertilizers while S their supply. The inverse demand is p = 10 - q, and the supply is MC = q. The marginal damage created by runoff water being exposed to fertilizers is MEC = q/2 The use of fertilizers is creating an externality and the government wishes to intervene in the market. Use a figure to depict the competitive outcome. Derive the competitive equilibrium outcome. Use a second figure to explain the negative externality attributed to the use of fertilizers. The use of fertilizers improves yield, but it also damages the underground aquifer. What is the Pigovian Tax? Use a figure to explain. Can it be used to correct for the externality? Derive the Pigovian tax and characterize the social optimum solution. Can a standard achieve the social optimum? What about a quota? Explain using a figure. Explain and show step-by-step!