Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 7, Problem 3P
(a)
To determine
The number of cars to be produced to maximize the social surplus.
(b)
To determine
Firms that will enable maximization of social surplus.
(c)
To determine
Consumers that will maximize social surplus by purchasing a car.
(d)
To determine
The social surplus.
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The following table shows how the marginal benefit enjoyed by John, Mary, Loren, and all other consumers of outdoor rock concerts varies with the number made available by a city government per summer.
a) What would be the efficient number of concerts to produce if the marginal cost of production were $425 instead of $1,000?
b) Suppose the marginal cost of producing rock concerts is only $250 per concert no matter how many are produced. Use the data to calculate the efficient number of concerts.
c) If a Lindahl scheme is used to finance the concerts, what prices of admission should be charged to John, Loren, and Mary?
Table 17-1Imagine a small town in which only two residents, Rochelle and Alec, own wells that produce safe drinking water. Each week Rochelle and Alec work together to decide how many gallons of water to pump. They bring the water to town and sell it at whatever price the market will bear. To keep things simple, suppose that Rochelle and Alec can pump as much water as they want without cost so that the marginal cost of water equals zero. The weekly town demand schedule and total revenue schedule for water is shown in the table below:
Quantity(in gallons)
Price
Total Revenue(and Total Profit)
0
$60
$0
100
55
5,500
200
50
10,000
300
45
13,500
400
40
16,000
500
35
17,500
600
30
18,000
700
25
17,500
800
20
16,000
900
15
13,500
1,000
10
10,000
1,100
5
5,500
1,200
0
0
Refer to Table 17-1. If this market for water were perfectly competitive instead of…
Four firms called Elm, Maple, Oak, and Cherry, produce wooden chairs. However, they also produce a great deal of garbage (a mixture of glue, varnish, sandpaper, and wood scraps). The first row of Table shows the total amount of garbage (in tons) that each firm currently produces. The other rows of the table show the cost of reducing garbage produced by the first five tons, the second five tons, and so on. First, calculate the cost of requiring each firm to reduce the weight of its garbage by one-fourth. Now, imagine that the government issues marketable permits for the current level of garbage, but the permits will shrink the weight of allowable garbage for each firm by one-fourth. What will be the result of this alternative approach to reducing pollution?
Chapter 7 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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