Refer to the above table and answer the question on the basis of the giveninformation for a public good.THQuantity1PR$10Ps$827.735643514PRand Psare the prices that Rafael and Sarah, respectively, are willing to pay for themarginal unit of a public good, rather than do without it. Rafael and Sarah are theonly members of society. Now suppose the public good can be provided by thegovernment at a constant marginal cost of $10. The optimal quantity of the publicgood is:1) 1 unit.2) 2 units.3) 3 units.4) 4 units.vonlst

The optimal quantity of public goods is, when Marginal Cost of Public Goods = Marginal…

Answered: Refer to the above table and answer the…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter8: Market Failure

Section: Chapter Questions

Problem 2P: Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and...

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Similar questions

Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it is the consumers, not the sellers, who are creating the negative externality.) Label the social optimal output and price as Fe and Qe. On the graph, shade in the deadweight loss at the market output.
Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and output. a. Assuming that the production of televisions generates external costs, illustrate the effect of the producers being forced to pay a tax equal to the external costs generated, and indicate the equilibrium output. b. If instead of generating external costs, television production generates external benefits, illustrate the effect of the producers being given a subsidy equal to the external benefits generated, and indicate the equilibrium output.
Fredo loves watching Downton Abbey on his localpublic TV station, but he never sends any money tosupport the station during its fund-raising drives.a. What name do economists have for people likeFredo?b. How can the government solve the problemcaused by people like Fredo?c. Can you think of ways the private market cansolve this problem? How does the option of cableTV alter the situation?
According to the Coase theorem,a. private actors can reach agreement to solve theproblem of externalities without the government.b. corrective subsidies are the best policy to solvethe problem of positive externalities.c. negative externalities are a problem for societybut positive externalities are not.d. when two private actors amicably solve theproblem of externalities, they shift the problem toa third party
Why is it difficult for private markets to providethe optimal quantity of a public good? Why is itdifficult for government to provide the optimalquantity of a public good?
Which one of the following is a definition of a merit good? A) Services which can only be provided by the government through taxesB) Goods which provide cear social and private benefits to consumersC) A good which can be produced by the market but would likely be under-consumedD) Goods which are beneficial in consumption but consumers are unaware of the extent of the benefitsE) Goods which are not capable of being provided by the market because they are excludable and rival Merit goods are an example of which of the following problems in economics:A) Free riderB) Principal-agentC) Tragedy of the CommonsD) Intertemporal choiceE) Excludable, non-rival goods provision De-merit goods have characteristics that if left the market mechanism, they are over consumed and impose private costs on the individual consume them, and also have wider social costs. Which of the following ways in which a government might seek to reduce consumption of of merit costs? Check all the apply A) Impose…
Consider the model of a rational consumer that cares about consumption of private goods and consumption of broadcast public television (a public good). Suppose that the total level of broadcast public television provided through voluntary contributions is 10 hours of programming. Then the government decides to raise money through a tax and provide 10 hours of programming to the public. What would we predict about crowd-out of voluntary contributions to broadcast public television when government does this? How would the answer change if consumers get warm glow utility from donating to broadcast public television in addition to utility from the public television itself? (Be specific.)
3. Jonny, Ken, and Lenny each value fire protection differently. Jonny’s demand for the public good is Q = 210 − 30P, Bill’s demand is Q = 210 − 15P, and Coco’s demand is Q = 132 − 12P. If the marginal cost of providing fire protection is $30.00. a. What is the socially optimal level of fire protection provision? b. Under Lindahl pricing, what share of the tax burden would each of the three people pay?
Consider two ways to protect your car from theft.The Club (a steering wheel lock) makes it difficult fora car thief to take your car. Lojack (a tracking system)makes it easier for the police to catch the car thiefwho has stolen it. Which of these methods confersa negative externality on other car owners? Whichconfers a positive externality? Do you think there areany policy implications of your analysis?
Greater consumption of alcohol leads to more motorvehicle accidents and, thus, imposes costs on peoplewho do not drink and drive.a. Illustrate the market for alcohol, labeling thedemand curve, the social-value curve, thesupply curve, the social-cost curve, the marketequilibrium level of output, and the efficient levelof output.b. On your graph, shade the area corresponding tothe deadweight loss of the market equilibrium.(Hint: The deadweight loss occurs because someunits of alcohol are consumed for which the socialcost exceeds the social value.) Explain.
Warm-glow: now consider the case where each individual cares only about their direct marginal benefit from the public good plus an additional warm-glow marginal benefit from giving as follows: WMBA=6-NA, WMBB=6-NB, and WMBC=24-NC, where NA, NB, and NC respectively represent Alice, Bianca, and Claire’s individual contributions. For example, Alice’s total marginal benefit is TMBA=MBA+WMBA=7-N+6-NA. Remember that N=NA+NB+NC. e. Who will contribute and how many works of art will be provided?
Warm-glow: now consider the case where each individual cares only about their direct marginal benefit from the public good plus an additional warm-glow marginal benefit from giving as follows: WMBA=6-NA, WMBB=6-NB, and WMBC=24-NC, where NA, NB, and NC respectively represent Alice, Bianca, and Claire’s individual contributions. For example, Alice’s total marginal benefit is TMBA=MBA+WMBA=7-N+6-NA. Remember that N=NA+NB+NC. Who will contribute and how many works of art will be provided?

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