The many identical residents of some cities love drinking apple juice. The cost of producing abottle of apple juice is $5, and the competitive suppliers sell it at this price. Each resident hasthe following willingness to pay for the tasty refreshment:QuantityWillingness to Pay(Dollars)First bottle10Second bottle8Third bottle6.Fourth bottle4Fifth bottle2Further bottles Assume that producing apple juice creates pollution, and each bottle has an external cost of $2. If the Mayor of the city decides to impose a $2 tax on each bottle of apple juice, then total surplus per person in the city before tax isand the total surplus per person after tax isO $9 and $3O $3 and $4O $3 and $3O $9 and $4

The total surplus in a market is a proportion of the total prosperity of all members in a market. It…

Answered: lowing willingness to pay for the tasty…

lowing willingness to pay for the tasty refreshment: zuantity Willingness to Pay (Dollars) irst bottle 10 econd bottle 8 hird bottle 6. ourth bottle 4 ifth bottle 2

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter30: Market Failure: Externalities, Public Goods, And Asymmetric Information

Section30.2: Internalizing Externalities

Problem 2ST

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Question

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

Assume that producing apple juice creates pollution, and each bottle has an external cost of $2. If the Mayor of the city decides to impose a $2 tax on each bottle of apple juice, then total surplus per person in the city before tax is
and the total surplus per person after tax is
O $9 and $3
O $3 and $4
O $3 and $3
O $9 and $4

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