Consider agent A with (inverse) demand curve for the public good PA 60-20A and agent B with inverse demand PB = 90 - 5QB, 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]
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- From an economic viewpoint, the optimal amount of pollution a. is zero because all pollution imposes costs on society. b. is that amount firms create when they maximize economic profits by setting their marginal private costs equal to market price. c. is that amount where the marginal social costs of producing a good precisely equals the price of the good. d. Both answers b. and c. are correct.Consider agent A with (inverse) demand curve for the public good PA = 60 − 2QA and agent B with inverse demand PB = 90 − 5QB, 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]Consider agent A with (inverse) demand curve for the public good Pa = 60 - 2Qa and agent B with inverse demand Pb = 90 - 5Qb , 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.
- Suppose the marginal cost of a pure public good increases as more is purchased by a community. Prove that the Lindahl equilibrium will result in a budget surplus at the efficient annual output of the pure public goodConsider 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 - image attached that has the inverse demand functionb) 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]
- The government is considering setting up a public health program to cull birds to prevent the spread of bird flu in two regions. The marginal benefit for this program in region A is QA = 90 − 3P and in region B is QB = 250 − 5P. What is the marginal social benefit curve for this program across both regions?Consider a two-good economy with one private and one public good. There are four consumers in this economy who contribute to public good provision. The price of the private good is $1 and the demand function of the public good for each consumer is as follows: p1 = 20 - 2G, p2 = 30-(5/10)G, p3 = 100-(G/2) and p4 = 60-G where G is the number of units of the public good and p^i is the price of each unit for consumer i in dollars. The cost of providing one extra unit of the public good is (alpha). (a) With 170 < alpha < 210, what is the optimal level of provision of the public good? Show the optimal point on a graph. (b) Is there a possibility that the public good is not supplied at all? Why? (c) If the public good is not supplied at all, what is the size of the deadweight loss due to this market failure? (d) If at least one person contributes, for what values of the public good will be supplied?suppose that scientists discover that this particular product has a significant Positive Externality. As we learned in class, the Demand curve is a depiction of marginal private benefit (MPB). However, the existence of the positive externality means that for every given output level, Marginal Social Benefit (MSB) is higher than Marginal Private Benefit (MPB). Add this MSB1 to the same graph you created for Question 5. Absent any government intervention, what are the equilibrium price P1, equilibrium quantity Q1, the resulting Consumer Surplus CS1, and the resulting Producer Surplus PS1? Indicate the Socially Optimal output, QSO1. Graphically indicate the size of Dead Weight Loss DWL1 if there is such a loss. In the narrative, please explain how you determined the socially optimal output level and the presence (or absence) of dead-weight loss in this situation. Is the market producing too much, too little, or just the right amount of the product with a positive externality in the…
- Consider a market with three consumers A, B and C. A has the demand function P = 20 – Q, B has the demand function P = 12 - 0.5Q and C has the demand function P = 8 - 0.5Q. The marginal cost of producing a product is constant at $8. (i) If the product is a private good, compute the market equilibrium quantity. (ii) Will your answer be different if the product is a public good instead? Compare your answer with (i). Hi, may i request for a detailed explaination? Thank you in advancedConsider a product market with three consumers X, Y and Z with demand function PX = 6 - QX, PY = 12 - QY and PZ = 18 - QZ respectively, where P is the price in dollars and QX, QY and QZ are the quantities demanded by Consumer X, Y and Z respectively. If the product is public good, obtain the marginal social benefit function and draw the diagram. Determine the optimal quantity of the product in the market if the marginal cost of the product is constant at (a) $3, (b) $9 and (c) $21.Suppose that three individuals each benefit from a public good. The marginal cost of the public good provision is fixed at $15 per unit: MC = $15 Whereas each of the three individuals (Person 1, Person 2, and Person 3) each receive a marginal benefit for each unit of the public good defined by: Person 1: MB1= 40 − 2Q Person 2: MB2= 30 − 2Q Person 3: MB3= 31 − Q 1. Draw a figure with all three MB curves, the MC curve, and the Social Marginal Benefit (SMB) Curve. Label all x-intercepts, y-intercepts, and kinks in the SMB curve.2. Given the above MB curves, write down the Social Marginal Benefit Curve as a function of Q. 3. What is the Socially Optimal Choice of Q and would any private individual purchase this on their own? Show your work. Suppose that you are on the town council, and that the town currently has Q = 11 of this public good. You are considering raising money from Persons 1 – 3 in order to buy another unit of Q, where Person 1 pays t1, Person 2 pays t2, Person 3 pays t3 4.…