Ñ6 Suppose a community is made up of ten thousand individuals, each of whom has anidentical demand for clean air, as represented by the following inverse-demand function:P = 25 -,005QA. Graph a representative individual's demand for clean air. Be sure to label axes,slope, and intercepts.B. Write the market demand function (equation in inverse-demand form) for clean air.Graph the market demand for clean air, being sure to label axes, slopes andintercepts.C. Solve mathematically for the free market quantity of clean air if MC = $100(constant). Specify any necessary assumptions (state the free market condition)and show all work.D. Solve mathematically for the efficient quantity of clean air if MC = $100 (constant).Specify any necessary assumptions (state the efficient condition) and show all work.E. Why do the free market and efficient quantities differ?

There are ten thousands individuals and each one has identical inverse demand function, P = 25 -…

Answered: Suppose a community is made up of ten…

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter11: Public Goods And Common Resources

Section: Chapter Questions

Problem 2PA

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Scenario 3 Suppose there are one hundred residents in a neighborhood, and each resident has an identical demand for a public good. The demand for each resident is given by P = 2 - .01Q. If your answer is not a whole number, please make sure to round to the nearest hundredth. Refer to Scenario 3. Find the social demand curve for the public good in this neighborhood. What is the y-intercept of the social demand curve?
P = 500 - 4Q and the (inverse ) 2. Consider the market for automobiles Let the (inverse ) market demand function be market supply function be P = - 100 + 2Q Plot the demand and supply functions and show the market equilibrium Find the equilibrium output and price in this market and show it on your graph Consumption of automobiles (driving behavior of buyers) generate negative external effects on others in society because emissions associated with driving and any increase in the probability of automobile accidents (let us assume more cars on the road lead to a higher probability of automobile accidents). Assume that the marginal external loss/damage to society from the consumption of a car is worth $60. Using the information given above, construct the marginal social benefit and marginal social cost curves as necessary d. Now calculate the efficient number of cars that should be sold and bought in the market e. Identify the net efficiency loss to society from the market level of cars…
Scenario 4 Suppose there are two residents in a neighborhood, Tana and Jason. Tana's demand for clean streets is Q = 100 – 4P. Jason's demand for clean streets is Q = 80 – 2P. If your answer is not a whole number, please make sure to round to the nearest hundredth. Refer to Scenario 4. Find the social demand curve for clean streets in this neighborhood. What is the y-intercept of the social demand curve? (Do not enter a dollar sign in your answer)
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?
a) Consumption of certain public goods by individuals or firms reduce the quality of services available to others. Is it possible to achieve an equilibrium in such markets? Explain the Pareto efficiency conditions of such goods.
(Optimal Provision of Public Goods) Using at least two individual consumers, show how the market demand curve is derived from individual demand curves (a) for a private good and (b) for a public good. Once you have derived the market demand curve in each case, introduce a market supply curve and then show the optimal level of production.
Now suppose the U.S. government does not know the demand curve for pollution and, therefore, cannot determine the optimal tax to achieve the desired level of pollution. Instead, it auctions off tradable pollution permits. Each permit entitles its owner to emit one ton of chemicals per day. To achieve the socially optimal quantity of pollution, the government auctions off 140 million pollution permits. Given this quantity of permits, the price for each permit in the market for pollution rights will be $----- . The previous analysis hinges on the government having good information regarding either the demand for pollution permits or the optimal level of pollution (or both). Given that the appropriate policy (tradable permits or corrective taxes) can depend on the available information and the policy goal, consider the following scenario. Suppose the government knows the optimal quantity of pollution as well as how much it costs a particular polluting firm to reduce pollution at each…
Consider an economy with a private good and public good. The economyconsists of two consumers whose utility functions are:u1(x1, y) = 1/2 ln x1 +1/2 ln y and u2(x2, y) = 1/3 ln x2 +2/3 ln y.The endowment of consumer 1 is w1 = 2, and endowment of consumer 2 is w2 = 3, both in units of private goods. The production of public good uses the linear technology y = z. 1. Find Lindahl equilibrium.
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 - image attached that has the inverse demand function
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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.)

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