(B) population and that the virus is transmitted easily between people who are close to each other. As Now, suppose that a highly contagious and deadly virus is introduced into the more people are in a given space, the likelihood of being exposed to the virus increases and the marginal externality costs (for example, due to sickness, not being able to work, and death) associated with transmission increase significantly. Suppose that Figure 1 at the end of this test identifies how marginal externality costs change as the number of occupied seats in a plane increases. Using the information given above, identify (in the graph below) the efficient (societal optimal) number of occupied seats on a plane and the number of seats we would observe in markets (the equilibrium size identified in part (A)). Discuss whether the number of occupied seats we would observe in markets is efficient and, if it is not efficient, clearly identify the deadweight loss associated with the number of occupied seats not being efficient.

(B) population and that the virus is transmitted easily between people who are close to each other. As Now, suppose that a highly contagious and deadly virus is introduced into the more people are in a given space, the likelihood of being exposed to the virus increases and the marginal externality costs (for example, due to sickness, not being able to work, and death) associated with transmission increase significantly. Suppose that Figure 1 at the end of this test identifies how marginal externality costs change as the number of occupied seats in a plane increases. Using the information given above, identify (in the graph below) the efficient (societal optimal) number of occupied seats on a plane and the number of seats we would observe in markets (the equilibrium size identified in part (A)). Discuss whether the number of occupied seats we would observe in markets is efficient and, if it is not efficient, clearly identify the deadweight loss associated with the number of occupied seats not being efficient.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.8P

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