The private demand for drive-in movies is given by P = 20 - Q. The industry marginal cost of showing drive-in movies is given by MC = Q. a. Drive-in movies can be viewed imperfectly from outside the fence. The external marginal benefits (EMB) received by such viewers are given by EMB = 5-0.25Q. Graph the external marginal benefit curve, and then use that information to graph the social demand (SD) curve. Price SD 25 EMB 24 23 22 21 20 19 18 D 17 16 15 15 14 13 12 11 10 9 8 76543210 MC 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Quantity of drive-in movies ▲ DWL b. Suppose that all drive-in movies are nationalized and shown for the public good. The Movie Czar chooses the price and quantity of movies that bring the greatest benefit net of costs to all viewers, regardless of the vantage point from which they view the movie. The optimal quantity of drive-in movies is now approximately , and the optimal price is
The private demand for drive-in movies is given by P = 20 - Q. The industry marginal cost of showing drive-in movies is given by MC = Q. a. Drive-in movies can be viewed imperfectly from outside the fence. The external marginal benefits (EMB) received by such viewers are given by EMB = 5-0.25Q. Graph the external marginal benefit curve, and then use that information to graph the social demand (SD) curve. Price SD 25 EMB 24 23 22 21 20 19 18 D 17 16 15 15 14 13 12 11 10 9 8 76543210 MC 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Quantity of drive-in movies ▲ DWL b. Suppose that all drive-in movies are nationalized and shown for the public good. The Movie Czar chooses the price and quantity of movies that bring the greatest benefit net of costs to all viewers, regardless of the vantage point from which they view the movie. The optimal quantity of drive-in movies is now approximately , and the optimal price is
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
Section: Chapter Questions
Problem 10QP
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i need a ,b,c,d answer urgent i will 5 upvotes.
Transcribed Image Text:b. Suppose that all drive-in movies are nationalized and shown for the public good. The Movie Czar chooses the price and
quantity of movies that bring the greatest benefit net of costs to all viewers, regardless of the vantage point from which they
view the movie. The optimal quantity of drive-in movies is now approximately
, and the optimal price is
c. Indicate the deadweight loss created by the positive externality as an area on your graph. The deadweight loss has a value
of
. Hint: You'll need to determine how much external marginal benefit the very last unit of output created
when drive-ins were privately run.
d. Government run drive-in movies can potentially improve on the private market outcome when a positive externality
exists.
True
False
Transcribed Image Text:The private demand for drive-in movies is given by P = 20 - Q. The industry marginal cost of showing drive-in movies is
given by MC = Q.
a. Drive-in movies can be viewed imperfectly from outside the fence. The external marginal benefits (EMB) received by such
viewers are given by EMB = 5-0.25Q. Graph the external marginal benefit curve, and then use that information to graph
the social demand (SD) curve.
Price
SD
25
EMB
24
23
22
21
20
19
18
D
17
16
15
9
432102876543210
DWL
MC
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Quantity of drive-in movies
b. Suppose that all drive-in movies are nationalized and shown for the public good. The Movie Czar chooses the price and
quantity of movies that bring the greatest benefit net of costs to all viewers, regardless of the vantage point from which they
view the movie. The optimal quantity of drive-in movies is now approximately
, and the optimal price is
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