Consider a situation where Barack (B) and Michelle (M) have demands for a public good that can be represented by the following functions: D_B: Q_B = 24 - 2P_B D_M: Q_M = 18 - 2P_M If Barack and Michelle are the only two consumers of this public good and the supply function for the good is: S: Q = -1 + P What is the socially optimal quantity of the public good?
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Consider a situation where Barack (B) and Michelle (M) have
D_B: Q_B = 24 - 2P_B
D_M: Q_M = 18 - 2P_M
If Barack and Michelle are the only two consumers of this public good and the supply function for the good is:
S: Q = -1 + P
What is the socially optimal quantity of the public good?
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- Consider a situation where Ron (R) and Nancy (N) have demands for a public good that can be represented by the following functions: D_R: Q_R 10 - 2P_R = D_N: Q_N= 12 - 2P_N If Ron and Nancy are the only two consumers of this public good and the supply function for the good is: S: Q=-3 + P What is the social optimum quantity of the public good? Answer:Consider a situation where Ron (R) and Nancy (N) have demands for a public good that can be represented by the following functions: D_R: Q R = 100-2P_R D_N: Q_N = 50-2P_N If Ron and Nancy are the only two consumers of this private good and the supply function for the good is: S: Q = -5 + P What is the social optimum quantity of the public good? Answer:Suppose 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 good
- Consider a public good that has 2 consumers, Dylan and Fred. Dylan’s demand for the public good is higher than Fred’s demand for the good. Show graphically and explain why the private market will provide an inefficient level of that public good.There are three consumers of a public good. The demands for consumers are as follows: p1 = 50 − G, p2 = 110 − G, p3 = 150 − G, where G measures the number of units of the good and ?? the price in dollars. The marginal cost of the public good is $190. Explain why the public good may not be supplied at all because of the free-rider problem. If the public good is not supplied at all, what is the size of the deadweight loss arising from this market failure?Now suppose that scientists discover that this particular product has a significant Positive Externality. As we learned in class, the Demand curve is a depiction of marginal private benefit (MPB). However, the existence of the positive externality means that for every given output level, Marginal Social Benefit (MSB) is higher than Marginal Private Benefit (MPB). Add this MSB1 to the same graph you created for Question 5. Absent any government intervention, what are the equilibrium price P1, equilibrium quantity Q1, the resulting Consumer Surplus CS1, and the resulting Producer Surplus PS1? Indicate the Socially Optimal output, QSO1. Graphically indicate the size of Dead Weight Loss DWL1 if there is such a loss. In the narrative, please explain how you determined the socially optimal output level and the presence (or absence) of dead-weight loss in this situation. Is the market producing too much, too little, or just the right amount of the product with a positive externality in…
- Consider a public good that has 2 consumers, Dylan and Fred. Dylan’s demand for the public good is higher than Fred’s demand for the good. Show graphically and explain why the private market will provide an inefficient level of that public good. Please Help!!!!!!!!Suppose 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)?The accompanying table relating to a public good provides information on the prices Young and Zorn are willing to pay for various quantities of that public good. These two people are the only members of society. Determine the price that society is willing to pay for the public good at each quantity of output. If the government’s marginal cost of providing this public good is constant at $7, how many units of the public good should government provide? Why not less? Why not more?
- A small town provides a fireworks display, which is a public good, every fourth of July. For simplicity, assume the town only has two residents: Hayden and Madison. Their demands for the fireworks display are illustrated in the figure. Determine the market demand curve for this public good. The market demand curve should be downward sloping In this example, the market will demand 2 fireworks at a price of and the market will demand 14 fireworks at a price of (Enter your responses rounded to two decimal places.) CHILD Price (dollars per firework) 8.00- 7.50 7.00- 6.50- 6.00- 5.50- 5.00- 4.50 4.00- 3.50- 3.00- 2.50- 2.00- 1.50 1.00- 0.50 0.00+ 0 Madison Hayden 2 4 6 8 10 12 Quantity (number of fireworks) 14 16The market demand curve of a good that is rival in consumption and excludable is the horizontal sum of the individual demand curves. However, the marginal social surplus curve of a public good is the vertical sum of the individual marginal benefit curves. What aspect of a public good causes the demand curves to be summed vertically instead of horizontally? Whether we sum vertically or horizontally depends only on whether the good is excludable. Whether we sum vertically or horizontally depends only on whether the good is rival in consumption. A vertical sum of individual demand curves is the same thing as a horizontal sum of individual demand curves. Whether we sum vertically or horizontally depends on whether the government, as opposed to the free market, usually provides the good.Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off tradable pollution permits. Each permit entitles its owner to emit one ton of chemicals per day. To achieve the socially optimal quantity of pollution, the government auctions off 140 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be $----- . The previous analysis hinges on the government having good information regarding either the demand for pollution permits or the optimal level of pollution (or both). Given that the appropriate policy (tradable permits or corrective taxes) can depend on the available information and the policy goal, consider the following scenario. Suppose the government knows the optimal quantity of pollution as well as how much it costs a particular polluting firm to reduce pollution at each…