3. Following are portions of the demand curves of three individuals for the water quality in a small pond. The water quality is expressed in terms of the parts per million (ppm) of dissolved oxygen (DO). Water quality improves at higher DO levels. The demand curves show the marginal willingness to pay of each individual (A, B, C). a. Complete the table. Find the aggregate marginal willingness-to-pay curve of these three people at each DO level. b. If the actual marginal cost of increasing DO is $12, what is the socially efficient level of DO in the lake, assuming these three people are the only ones involved? Marginal WTP DO Level Aggregate MWTP (ppm) A B $10 $10 $12 1 10 4. 8. 4. 2 4429 456

3. Following are portions of the demand curves of three individuals for the water quality in a small pond. The water quality is expressed in terms of the parts per million (ppm) of dissolved oxygen (DO). Water quality improves at higher DO levels. The demand curves show the marginal willingness to pay of each individual (A, B, C). a. Complete the table. Find the aggregate marginal willingness-to-pay curve of these three people at each DO level. b. If the actual marginal cost of increasing DO is $12, what is the socially efficient level of DO in the lake, assuming these three people are the only ones involved? Marginal WTP DO Level Aggregate MWTP (ppm) A B $10 $10 $12 1 10 4. 8. 4. 2 4429 456

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.9P

See similar textbooks

Similar questions

Suppose that there are three beachfront parcels of land available for sale in Asilomar and six people who would each like to purchase one parcel. Assume that the parcels are essentially identical and that the minimum selling price of each is $445,000. The following table states each person's willingness and ability to purchase a parcel. Person Willingness and Ability to Purchase (Dollars) Ana 510,000 Charles 470,000 Dina 420,000 Gilberto 390,000 Juanita 380,000 Yakov 600,000 Which of these people will buy one of the three beachfront parcels? Check all that apply. A. Ana B. Charles C. Dina D. Gilberto E. Juanita F. Yakov Assume that the three beachfront parcels are sold to the people that you indicated in the previous section. Suppose that a few days after the last of those beachfront parcels is sold, another essentially identical beachfront parcel becomes available for sale at a minimum price of $432,500. This fourth…
Situation 37-2Dan and Ann live in the same community and both can participate in two activities, producing and stealing. Refer to Situation 37-2. Ann spends 8 hours of each day producing and 1 hour of each day stealing. It is probably the case for her that a. There is not enough information to answer the question. b. her MB/MC ratio for producing never changed, no matter how much or how little she produced. c. her MB/MC ratio for stealing never changed, no matter how much or how little she stole. d. at some point the MB/MC ratio for producing fell below the MB/MC ratio for stealing. e. her MB/MC ratio for producing was always greater than her MB/MC ratio for stealing.
Suppose that there are three beachfront parcels of land available for sale in Asilomar and six people who would each like to purchase one parcel. Assume that the parcels are essentially identical and that the minimum selling price of each is $745,000. The following table states each person's willingness and ability to purchase a parcel. Person Willingness and Ability to Purchase (Dollars) Charles 900,000 Dina 810,000 Gilberto 770,000 Juanita 720,000 Lorenzo 690,000 Neha 680,000 Which of these people will buy one of the three beachfront parcels? Check all that apply. Charles Dina Gilberto Juanita Lorenzo Neha Assume that the three beachfront parcels are sold to the people that you indicated in the previous section. Suppose that a few days after the last of those beachfront parcels is sold, another essentially identical beachfront parcel becomes available for sale at a minimum price of $732,500. This fourth…
The figure below presents data for two families (1 and 2), including their travel cost per trip (p1,p2) and the number of trips they take (q1,q2). Assume that the families are identical except for their travel costs. The figure below presents a marginal willingness to pay (demand) curve. Consider family 2 experiencing this amenity--what area characterizes the: i. Total benefits ii. total costs iii. Net benefits
Do you believe higher education provides our economy with a positive externality? Why or why not? Do you believe the steps that the federal government takes to encourage the socially optimal amount of higher education be produced/consumed is appropriate? Too much? Too little? Why? (Use appropriate economic theory to support your position.) 2. Explain why according to the theory of rational ignorance, an individual will decide not to participate in the election process (vote).
Suppose five people have houses on the same small lane. They all individually benefit from regular maintenance of the lane. Their individual marginal benefit curves are P = 8 ― (1/10)Q, where P reflects a willingness to pay in thousands and Q is the length of the road repaired in ten-yard units. The cost of maintenance is $2,000 per ten yards. Suppose one person is currently the only one paying for maintenance. How much does this person buy, and what is the deadweight loss? Does anyone individually have an incentive to pay for additional maintenance, and why or why not?
Two individual would be better off if they were able to negotiate an agreement that specifies each person’s contribution on public good. True or False. Compare this with voluntary contribution and when negotiation happen
Jill and Jack both have two pails that can be used to carry water down from a hill. Each makes only one trip down the hill, and each pail of water can be sold for $5. Carrying the pails of water down requires considerable effort. Both Jill and Jack would be willing to pay $2 each to avoid carrying one pail down the hill, and an additional $3 to avoid carrying a second pail down the hill. a. Given market prices, how many pails of water will each child fetch from the top of the hill? pails. b. Jill and Jack
Use the following information for questions 3-6. The columns indicate the number of trains running. Total railroad profits are the total profits to the railroad from running the specified number of trains. Total lost farmer profits are total profits the farmer loses from a specified number of trains running. Trains 1 2 3 Total Railroad Profit $100 $200 $300 Total Lost Profit for Farmer $40 $130 $250 Assuming transaction costs are $0, if the Farmer and Railroad split all gains from trade evenly, would the Farmer prefer his land to be protected by a liability rule or a property rule? A. A liability rule B. A property rule C. The Farmer is indifferent between the two rules D. None of the above
Suppose 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?
The accompanying table shows Tom and Ray's total willingness to pay for different amounts of public recreational areas (REC), which is measured in acres. The marginal cost of one acre of recreational area is $1,000. Tom's willingness to pay Ray's willingness to pay REC (acres) $2,000 $1,000 1 3,000 1,800 2 3,800 2,500 3 4,300 3,100 4 4,500 3,600 5 4,600 4,000 6 4,600 4,300 7 4,600 4,400 8 4,600 4,400 9 What is the socially optimal level of recreational areas? What should be the tax burden to Tom and Ray so that their consumer surpluses are equal?
Two firms are ordered by the Government to reduce their pollution levels. Firm A’s marginal costs associated with pollution reduction are MC = 20 + 4Q. Firm B’s marginal costs associated with pollution reduction are MC = 10 + 8Q. The marginal benefit of pollution reduction is MB = 400 – 4Q. Compare the social efficiency of the three possible outcomes: (1) require both firms to reduce pollution by the same amount;(2) charge a common tax per unit of pollution;(3) require both firms to reduce pollution by the same amount but allow pollution permits to be bought and sold.