1. Two people have demands for public good X, where X is units and P is price per unit: Person 1 demand: X₁ = 30 - 0.5P1 Person 2 demand: X2 = 20 - 0.5P2 nt to provide another unit of X is MC = 40.
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- 11-) Andrew, Beth, and Cathy live in Lindhville. Andrew’s demand for bike paths, a public good, is given by Q = 12–2P. Beth’s demand is Q = 18–P, and Cathy’s is Q = 8–P/3. The marginal cost of building a bike path is MC = 21. The town government decides to use the following procedure for deciding how many paths to build. It asks each resident how many paths they want, and it builds the largest number asked for by any resident. To pay for these paths, it then taxes Andrew, Beth, and Cathy the prices a, b, and c per path, respectively, where a + b + c = MC. (The residents know these tax rates before stating how many paths they want.)A-). If the taxes are set so that each resident shares the cost evenly (a = b = c), how many paths will get built?B) Show that the government can achieve the social optimum by setting the correct tax prices a, b, and c. What prices should it set?Question Consider two individuals, Adam and Eve, who have the following in-verse demand curves and face a marginal cost curve below. PA = 100 1/2 Qa; PE = 200 Qe MC = 2/3 Q (a) If the good is private, what is the equilibrium price and quantity in a competitive market? Is this outcome ecient? (b) If the good is public, ecient provision implies what price and quantity in the market?Please helo me with this question There are 50 residents that live in a small town in California. Each resident uses electricity and there is one power station that produces electricity for the residents from coal. Each residents' demand for electricity is Q = 10 - 2P and the supply function for the power plant is Q = 150P. For each unit of electricity that the power station produces, there is a corresponding release of pollution that leads to asthma and other health problems for the 50 residents. The marginal damage of each unit of electricity produced, per person, is $.05. a. What is the market equilibrium price and quantity per unit of electricity? b. What is the efficient Pigouvian tax per unit of pollution? c. The government of this small California town decides to impose the efficient Pigouvian per unit tax on the power station. What is the new social optimum price and quantity per unit of electricity? d. What is the government tax revenue? e. What is the gain in total…
- This question asks you to find the socially optimal outcome. Suppose a social planner takes the demand function and cost functions as given, and can choose (i) the market price, (ii) the number of firms, and (iii) the quantity produced by each firm [the planner is free to choose any quantity, even if the firms would lose money]. The social planner’sgoal is to maximize the sum of consumer surplus and firms’ profits. To do this, the planner will take into account the two economic principles of efficiency, (i) Allocative efficiency which implies price=mc. (2) Efficiency in production, which means that the cost of production of the total market quantity should be minimized. Suppose the demand function is Q(p) = 40 – 5p. For each of the following cost functions, what market price, number of firms and quantity for each firm will the social planner choose?a) C(q) = 20 + 4qb) C(q) = 3 + q^2/3 + 3q.This question asks you to find the socially optimal outcome. Suppose a social planner takes the demand function and cost functions as given, and can choose (i) the market price, (ii) the number of firms, and (iii) the quantity produced by each firm [the planner is free to choose any quantity, even if the firms would lose money]. The social planner’sgoal is to maximize the sum of consumer surplus and firms’ profits. To do this, the planner will take into account the two economic principles of efficiency we discussed in class, (i) Allocative efficiency which implies price=mc. (2) Efficiency in production, which means that the cost of production of the total market quantity should be minimized. Suppose the demand function is Q(p) = 40 – 5p. For each of the followingcost functions, what market price, number of firms and quantity for each firm will the social planner choose?a)C(q) = 20 + 4qb) C(q) = 3 + q^2/3 + 3q.Price MC₂ D MC₂ = S F Quantity Figure 9 Demand curve and marginal private and social cost curves Towards the right of Figure 9 are two circular red markers with a line between them that you can use to draw a MCp + t curve on Figure 9. You can move the markers with the mouse by clicking on them and dragging. Alternatively, you can tab to each marker and then use the keyboard arrow keys. Figure 9 shows a perfectly competitive market for a good. The supply curve S is also the sum of the firms' marginal private cost curves. The firms in this market create pollution, the costs of which do not enter into the firms' costs. The line labelled MCs is the sum of the firms' marginal social cost curves, including the costs of their pollution borne by others. Assume the government decides to impose a Pigovian tax, 1. Drag the line into an appropriate place on the diagram to ensure a socially optimal level of production of the good.
- Bicycle paths are public goods that can be supplied at cost C = 10Q + Q2 where Q measures kilometers of bicycle paths. There are only two people in this city Mr. A and Ms. B. Describe the free-rider problem associated with the supply of this good. Suppose that demand is given by QA = 50 ‒ 0.5P and QB = 25 ‒ P. Find the efficient quantity of paths. Provide a fully labeled demand curve diagram. Calculate the cost of supplying the efficient quantity and suggest how this cost might be recovered from the two consumersSuppose the demand for standard sized bottled water in the US is Qd=120-30.5P where Qd is monthly quantity demanded in millions and P is the price per bottle in dollars and cents. If the marginal private cost (MPC) of producing the bottled water is one dollar, calculate the market equilibrium quantity. Explain what a constant marginal cost implies. Does that mean the total opportunity cost of producing bottled water is unrelated to how many are produced? Let’s assume that the marginal private benefit (MPB) of bottled water equals the marginal social benefit (MSB). Explain what that means. At the equilibrium calculated in part A, what do you know about buyers’ willingness to pay in each transaction?MC₂ = S Price D Quantity Figure 9 Demand curve and marginal private and social cost curves Towards the right of Figure 9 are two circular red markers with a line between them that you can use to draw a MCp + t curve on Figure 9. You can move the markers with the mouse by clicking on them and dragging. Alternatively, you can tab to each marker and then use the keyboard arrow keys. Figure 9 shows a perfectly competitive market for a good. The supply curve S is also the sum of the firms' marginal private cost curves. The firms in this market create pollution, the costs of which do not enter into the firms' costs. The line labelled MCs is the sum of the firms' marginal social cost curves, including the costs of their pollution borne by others. Assume the government decides to impose a Pigovian tax, t. Drag the line into an appropriate place on the diagram to ensure a socially optimal level of production of the good. MC₂
- 2. Given the demand function of motorcycle: Q = 500 – 100P where Q is total quantity demanded (unit: 10,000) and P is daily price (in unit of US$). (1) If the current daily price is US$1.0, please find the total quantity demanded. (2) If the external costs of motorcycle ($2) are all internalized, what would be the total quantity demanded? (3) Please also discuss impacts of this internalization policy on supply, demand and public infrastructures.If a boxing fight is shown on pay-per-view television every Saturday at 4 p.m., the demand curve for each fight is given in the accompanying graph. Cost ($/fight) 25 20 15 10 5 0 10 20 30 40 50 Viewing households (millions) If there is a pay-per-view charge to watch a fight, the outcome is ----because efficient; prices will allocate the program to those who value it the most efficient; the marginal cost of an additional viewing household is zero O inefficient; the marginal cost of an additional viewing household is zero O inefficient; television stations would not always make a profit2 of 3 The accompanying diagram shows the demand and supply curves for taxi rides in New York City. Uber's entry into the market reduces the quantity of rides demanded from taxis at every price. On the accompanying graph, shift the demand curve to accurately represent the change in demand. Then, move point E₁ to the new equilibrium point. The unlabeled point is to help you answer the next question and is not movable. Assume that New York City politicians respond by imposing a regulated price of $2.50 per mile. Calculate consumer surplus, producer surplus, and total surplus for the taxi market after Uber has entered the market. Consumer surplus: $ 750 Producer surplus: $ 600 Total surplus: $ 1350 million million million Price ($ per mile) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 0 2.50 1.30 Market for Taxi Rides in NYC D 240.00 S 600.00 120 240 360 480 600 720 840 960 1,080 1,200 Quantity of taxi rides (millions of miles)