The diagram to the right depicts the market for cough medicine in a small town. The quantity of cough medicine ismeasured in bottles sold per week; price is measured in dollars. The townspeople are happier and healthier becausepeople who have colds and flus buy and take the medicine and reduce the spread of infection. What is the sociallyoptimal number and price of cough medicine?$28-$24-.....The socially optimal equilibrium occurs at a quantity ofbottle(s) and a price of $$20-$16-S$12-$11$10$8-$4-DAQ16: 20$0-10203040

In a market, when an activity has a positive impact on society, it will increase social marginal…

Answered: The diagram to the right depicts the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If the equilibrium quantity of a good is also the socially optimal quantity, then: Multiple Choice the marginal benefit to consumers of another unit of the good is zero. the marginal cost to producers of another unit of the good is zero. total economic surplus has been maximized. it's possible to make at least one person better off without hurting anyone else.
Which of the following statements is correct? a.) Economic analyses can often do a reasonable job of evaluating the net benefits from some re-allocation of environmental resources. Policymakers should thus feel comfortable in choosing among alternative policies according to whichever one yields the highest net benefits. b.)Basic benefit-cost analysis, as typically practiced in the U.S., assumes that the marginal value of an extra dollar of net benefits is the same for everyone. c.)All socially optimal allocations are efficient, but the reverse is not true. d.)There is always a tradeoff between efficiency and equity. A reallocation of environmental resources that improves efficiency cannot also improve equity, and vice versa.
A local government is considering building new public hiking trails in town.Suppose that the trails are public goods. There are two types of people in a smalltown economy, 1000 avid hikers and 1000 non-hikers, who have typical individualmarginal benefit curves: MB_H = 350 − 5Q and MB_N = 240 − 6Q for the hikersand the non-hikers respectively, where Q is the miles of trails. On the same graph,draw the marginal benefit curves for each type of person and MB of the overalleconomy. If the marginal cost providing this public good is $27000 per mile whatis the optimal level of the public good?
2. In the diagram below, mark the appropriate line segment that measures a) a respondent's maximum willingness to pay (WTP) to avoid a degradation of environmental quality and b) a respondent's minimum amount of compensation that will be acceptable (WTA) if the change takes place. Are these the same or they potentially different? Note that x represents the composite bundle of market goods and q represents environmental quality and the utility levels associated with the individual's indifference curve is such that U1 < Uo (since qi < qo). X Uo D U1 E q1 qo
Mike, Rosie, and Shobber live in separate houses along a dark and windy road. The following represent their marginal benefits for street lights: MBMike=200-2QM MBRosie=100-QR MBShobber=100-2QS where QM represents the quantity of street lights consumed by Mike, QR is the quantity of street lights consumed by Rosie and QS is the quantity of street lights consumed by Shobber. The Mayor of their town considers street lights to be a public good and is charged with purchasing the optimal number of street lights from Boone’s Light Shop. Boone’s is willing to sell street lights for $150 per light. b. What quantity of street lights should the Mayor purchase? Why? Suppose the Mayor is able to implement a pricing scheme to charge users for the illumination services. c. How much should each individual be charged? Does the tax revenue cover the total cost of providing the optimal number of streetlights?
19)Which of the following best illustrates the ceteris paribus assumption? * a)If the law requires people to wear seatbelts in order to reduce fatality rates, it may also cause people to drive faster. b)Chris notices that when economists discuss policy, they use the word "should" quite a lot, and they tend to disagree c)Felicia argues that since her company makes less profit when it limits its toxic pollution emissions, it must be true that pollution regulations are bad for everyone d)Caitlin notices that all other things being equal, her grades are higher the more time she spends studying
Consider Ron’s demand for after school care for his children. The marginal benefit Ron receives for every hour of childcare is provided in the accompanying table. After school childcare(hours per day) Marginal benefit($ per hour) 1 $32 2 $30 3 $20 4 $14 a. If an hour of childcare costs $24, how many hours will Ron purchase each day? Assume Ron can only purchase care in one-hour increments (no partial hours). b. If an hour of childcare costs $18, how many hours will Ron purchase each day? Assume Ron can only purchase care in one-hour increments (no partial hours).
(Figure: Market 5) Use the graph to answer the question. Price Supply $12 $10 $8 $6 $4 | Marginal social benefit $2 Demand 2 6 8 10 12 Quantity The graph shows the marginal social benefit, demand, and supply curves in the toothbrush market. Market forces would yield a quantity of whereas the socially optimal quantity is four; six four; eight six; four O eight; four %24
Mitchell and Scott can produce either apples or oranges. The table lists the maximum number of each that they can produce per day. Apples Oranges Mitchell 6 30 Scott 12 24 Which of the following combinations of goods is it possible for Mitchell and Scott to consume if they can trade apples and oranges on the world market at a price of $6/kg for apples and $1/kg for oranges? 15kg of apples and 18kg of oranges 15kg of apples and 20kg of oranges 10kg of apples and 50kg of oranges Okg of apples and 108kg of oranges
Suppose there are two consumers A and B, and two goods x and y. A's utility function has the following form UA = XA - (XB)1. Which of the following is true? Consumer A's consumption of good x exhibits a negative externality. Consumer A's consumption of good x exhibits a positive externality. Consumer B's consumption of good x exhibits a negative externality. Consumer B's consumption of good x exhibits a positive externality.
Consider the model of a rational consumer that cares about consumption of private goods and consumption of broadcast public television (a public good). Suppose that the total level of broadcast public television provided through voluntary contributions is 10 hours of programming. Then the government decides to raise money through a tax and provide 10 hours of programming to the public. What would we predict about crowd-out of voluntary contributions to broadcast public television when government does this? How would the answer change if consumers get warm glow utility from donating to broadcast public television in addition to utility from the public television itself? (Be specific.)

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