Suppose wearing face masks during the coronavirus pandemic leads to positive externalities, given that persons you come into contact with are less likely to contract the virus. If so, then, absent government subsidies, the number of persons wearing face masks will be greater than the optimal level from society's point of view the number of persons wearing face masks will be below the optimal level from society's point of view more people will want to wear face masks because external benefits tend to play a role in private decisions, such as whether to wear a face mask COMEND the number of persons wearing face masks will be optimal from society's point of view

Suppose wearing face masks during the coronavirus pandemic leads to positive externalities, given that persons you come into contact with are less likely to contract the virus. If so, then, absent government subsidies, the number of persons wearing face masks will be greater than the optimal level from society's point of view the number of persons wearing face masks will be below the optimal level from society's point of view more people will want to wear face masks because external benefits tend to play a role in private decisions, such as whether to wear a face mask COMEND the number of persons wearing face masks will be optimal from society's point of view

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter8: Market Failure

Section: Chapter Questions

Problem 3P

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Consider two groups of citizens, each group can either choose to drive x = d or to take public transport x = p. The first group, group 1, enjoys driving and has the following 3 benefit from using their car within the ULEZ area: B1(x1 = d) = 18. The second group, group 2, does not enjoy driving and has a benefit of B2(x2 = d) = 0 from driving their car. If they don’t drive, citizens can use public transport to get around. The benefit of doing so is the same for both groups: B1(x1 = p) = B2(x2 = p) = 10. Both groups drive cars that do not meet the ULEZ requirements and therefore create excessive pollution. For simplicity, we consider that pollution, and the health problems it induces, are the main cost of driving. This cost is imposed on both groups and is equal to Ci(x1 = d, x2 = d) = 10 if both groups drive, Ci(x1 = p, x2 = d) = Ci(x1 = d, x2 = p) = 5 if only one group drives and Ci(x1 = p, x2 = p) = 0 if neither group drives, where i represents either group 1 or group 2. The…