a. What kind of market would describe the center? Graph the center's average total cost curve and its marginal cost curve b. The mayor proposes financing the center with a lump-sum tax of $24 and then opening the center to the public for free. How many times would each person visit? Calculate the benefit each person would get from the center, measured as consumer surplus minus the new tax c. The mayor's anti-tax opponent says the center should finance itself by charging an admission fee. What is the lowest price the museum can charge without incurring losses?

a. What kind of market would describe the center? Graph the center's average total cost curve and its marginal cost curve b. The mayor proposes financing the center with a lump-sum tax of $24 and then opening the center to the public for free. How many times would each person visit? Calculate the benefit each person would get from the center, measured as consumer surplus minus the new tax c. The mayor's anti-tax opponent says the center should finance itself by charging an admission fee. What is the lowest price the museum can charge without incurring losses?

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: Public Goods And Common Resources

Section: Chapter Questions

Problem 5PA

See similar textbooks

Similar questions

Write down a model of positive production externality with two firms, in which theproduction activities of one firm directly affects the production/cost of the other firm.State and explain the key assumptions of the model. Using the model, answer thefollowing questions:(a) Explain why the presence of a positive production externality could prevent therealisation of an efficient outcome.(b) Name a possible cure for the positive production externality and explain how itcould solve the inefficiency problem.
use diagramsa. What is the effect on the equilibrium price and quantity traded in market of theintroduction of a new technology that reduces costs of production for all firms?b. What is the effect on the equilibrium price and quantity traded in a market of a changein tastes that reduces the demand for the product?c. What is the effect on the equilibrium price and quantity traded in a market of theimposition of a tax per unit sold on suppliers?d. What is the effect on the equilibrium price and quantity traded in a market of thepayment of a subsidy per unit sold paid to suppliers?
Lecture: Externality - Pigou8. All-Leather is a tanning company located on Lake Michigan in Chicago. Its total cost functionis C(QA) = 125 + 8QA + 5QA2, where QA is leather production per week in thousands of pounds.a) If leather sells for $408 per thousand pounds, how much leather will All-Leather produce?How much profit does All-leather earn?Enjoy is a beverage company located on Lake Michigan near All-Leather in Chicago. Enjoy’sproduction of beverages is negatively affected by water pollution from All-Leather’s productionof leather. Enjoy’s total cost function to produce beverages isC(QE) = 10QE +3QE2 + 3QA2where QE is Enjoy’s weekly production of beverages, in thousandsof gallons and, as above, QA is All-Leather’s weekly production of leather.b) Is this an example of a pecuniary externality or a real externality? Explain.c) What is the extra cost to Enjoy from an additional thousand tons of leather production by AllLeather (i.e., the external marginal cost of an extra unit of QA…
Which are the two key ’problems’ encountered in aggregating on the consumer side, and why it not occurs on the producer side ? Pls short answer in 15-20 Sentences
a. (TRUR or FALSE) Labor can be a fixed cost? b. (CHOOSE THE RIGHT ANSWER) One of the best examples of internalizing externalities is through (Donation, Loans, Subsidied or Sponsors) c. (CHOOSE THE RIGHT ANSWER) If it costs Mary P500 to produce a product and Anne P600, the producer surplus when the price of the product is 800 is (300, 200, 400, 500)
(J) Suppose the production process of a particular good creates a negative externality such as pollution. Other things being equal, would society be better off if this good were produced by a perfectly competitive market or by a monopoly? a. Society would be better off if this good were produced by a perfectly competitive market, because a perfectly competitive market responds to consumers' desires in the long run b. Society would be better off if this good were produced by a perfectly competitive market, because a perfectly competitive market will produce the quantity where Marginal Revenue equals Marginal Cost c. Society would be better off if this good were produced by a monopoly,
1. Your cousin Vinnie owns a painting company with fixed costs of $150 and the following schedule for variable costs: Quantity Variable Cost Average Fixed Cost Average Variable Cost Average Total Cost (Houses Painted per Month) (Dollars) (Dollars) (Dollars) (Dollars) 1 15 2 35 3 60 4 90 5 135 6 240 7 480 The efficient scale is houses. ? #2 image : The city government is considering two tax proposals: • A lump-sum tax of $300 on each producer of hamburgers. • A tax of $1 per burger, paid by producers of hamburgers. Which of the following statements is true as a result of the lump-sum tax? Check all that apply. Which of the following statements is true as a result of the lump-sum tax? Check all that apply. Average variable cost will increase. Average total cost will increase. Average…
Give typing answer with explanation and conclusion One advantage of an emissions tax over a cap-and-trade system is that a. permit markets can have transactions costs that taxes do not. b. taxes put a price on pollution, but cap-and-trade systems do not. c. once a cap-and-trade system is in place, there is no way for the government to adjust the price of permits. d. taxes are always popular.
a) State the condition for the Pareto optimal provision of a public good. Interpret the condition. b) Consider agent A with (inverse) demand curve for the public good and agent B with inverse demand , where prices are measured in £ per unit. The marginal cost of producing the public good is £10 per unit. What is the Pareto efficient level of the public good? Explain. Illustrate in a graph. [Hint: Compute the marginal social benefit of the public good by adding up the demand curves vertically, over the p’s] c) Describe the Vickrey-Clarke-Groves (VCG) Mechanism, provide examples and discuss problems with the VCG mechanism.
A company is considering building a bridge across ariver. The bridge would cost $2 million to build andnothing to maintain. The following table shows thecompany’s anticipated demand over the lifetime ofthe bridge:Price per CrossingNumber of Crossings,in Thousands$8 07 1006 2005 3004 4003 5002 6001 7000 800a. If the company were to build the bridge, whatwould be its profit-maximizing price? Would thatlevel of output be efficient? Why or why not?b. If the company is interested in maximizing profit,should it build the bridge? What would be itsprofit or loss?c. If the government were to build the bridge, whatprice should it charge?d. Should the government build the bridge?Explain.
1. Decide whether the following are true, false, or uncertain and thoroughly explain your reasoning. (a) (Review) If AC > MC at the firm’s chosen output level, then the firm is producing on the upward sloping part of its AC curve. (b) When an unregulated market creates positive externalities it tends to produce too little and when it creates negative externalities tends to produce too much. (c) Charging a toll on an uncongested highway increases total surplus because this creates revenue to pay for building and maintaining the highway. (d) Charging a toll on a congested bridge increases total surplus because it reduces the number of drivers and thereby reduces congestion. (e) If a public good cannot be paid for through user fees, then it should not be provided. (f) The costs of National Parks should be covered by charging admission fees, because we shouldn’t have National Parks if the people who use them are not willing to pay enough to cover these costs. (g) You have been offered…
(I.) Draw (for yourself) the marginal abatement cost curves for Al and Bob, with “units of runoff abated” on the horizontal axis and “marginal cost” on the vertical axis. How do the curves look like? a. The two lines start from the origin with slopes of 3 and 5 for Al and Bob, respectively b. The two lines are flat with respect to the horizontal axis with intercepts of 3 and 5 for Al and Bob, respectively (II.) To achieve its goal, suppose the local agency asks Al and Bob to abate 10 units each and offers to pay their total abatement costs. What is the total cost to the agency? a. 400 b. 300 c. 250 (III.) (Considering Al’s and Bob’s marginal abatement costs in part (II), has the agency achieved its abatement goal at the lowest possible cost? Why or why not? a. Yes, because the Equimarginal Principle was satisfied b. No, because the Equimarginal Principle was not satisfied c. Yes, because the pollution level was reduced d. No, because the pollution level was not reduced enough