MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 4CACQ
(a)
To determine
To find: The socially efficient quantity of the public good.
(b)
To determine
To find: The amount that each worker have to pay per unit to provide the socially efficient quantity.
(c)
To determine
To find: Whether the amount of the public good provided by the two workers socially efficient and compare the level of
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
There are two people. Each person's demand for a public good is P = 20 - Q. The marginal cost of providing the public good is given by MC2 = $12 (MC is not $24). The above graph summarizes the relevant information. The total demand for the two workers shown above is the vertical sum of the demand curve for each worker.(a) What is the socially efficient quantity of the public good?(b) How much will each person have to pay per unit to provide the socially efficient quantity?(c) What is the consumer surplus for each person based on the quantity determined in (a) and the price determined in (b)?(d) Given that this is a public good, if either one of the two people does not pay the price you have stated in (b), can they be prevented from consuming the good?
PRICE OF CARS
1. Efficiency in the presence of externalities
Cars impose many external costs on society: carbon dioxide emissions that contribute to air pollution, congestion on roadways, and so on. Therefore,
the market equilibrium quantity of cars is not equal to the socially efficient quantity. The following graph shows the demand for cars (their marginal
private benefit), the supply of cars (the marginal private cost of producing them), and the marginal social cost of cars, including both the marginal
private cost and external costs.
Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially
efficient quantity.
Demand
(MPB, MSB)
QUANTITY OF CARS
As a result, the market output is
MSC
+
Market Output
Socially Efficient Output
Supply
(MPC)
the socially efficient output.
(?)
Which of the following policies could help the government achieve the socially efficient outcome? Check all that apply.
☐…
Suppose that speeding imposes externalities on other people resulting in a social cost of $50. A town is considering hiring an extra police officer to give out speeding tickets. If we want to maximize social welfare (absent enforcement costs), which of the following statements are true? (Assume risk neutral drivers.) What happens to the socially optimal cost of the speeding ticket if the town decides to hire the police officer?
a) It goes down
b) It goes up
c) The amount that it goes down depends on salary of the police officer
d) The amount if goes up depends on the salary of the police officer
e) None of the above
Chapter 14 Solutions
MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
Ch. 14 - Prob. 1CACQCh. 14 - Prob. 2CACQCh. 14 - Prob. 3CACQCh. 14 - Prob. 4CACQCh. 14 - Prob. 5CACQCh. 14 - Prob. 6CACQCh. 14 - Prob. 7CACQCh. 14 - Prob. 8CACQCh. 14 - Prob. 9CACQCh. 14 - Prob. 10CACQ
Ch. 14 - Prob. 11PAACh. 14 - Prob. 12PAACh. 14 - Prob. 13PAACh. 14 - Prob. 14PAACh. 14 - Prob. 15PAACh. 14 - Section 16(a) of the Securities and Exchange Act...Ch. 14 - Prob. 17PAACh. 14 - Prob. 18PAACh. 14 - Prob. 19PAACh. 14 - Prob. 20PAACh. 14 - Prob. 21PAACh. 14 - Prob. 22PAACh. 14 - Prob. 23PAA
Knowledge Booster
Similar questions
- Below is the the market demand curve for reusable water bottles when only the marginal private benefits (MPB) that the owners of reusable water bottles receive are taken into account. Let's say that the government issued vouchers that ensured the reusable water bottle buyers received $10 per bottle. Assume that this will shift the demand curve to the marginal social benefit level (MSB). Move the demand curve to show this change and reposition the Social Equilibrium point to reflect the socially optimal price and quantity. Provide your answer below: 35 32.5 30 27.5 S (MPC)_ 25 22.5 Sacial Equilibrium (100,20) Market Equilibrium (100,20) 20 17.5 15 12:5 10 MPB 7.5 -5 2.5 175 200 Quantity -25 25 50 75 100 125 150 --2:5 -5 Pricearrow_forwardSuppose there are three consumers of a public good with the following marginal benefits of consumption related to the quantity of the public good provided: Consumer 1: MB1 = 5 – 2Q Consumer 2: MB2 = 4 – Q Consumer 3: MB3 = 3 – Q Calculate and draw the total marginal benefit function of the public good in a fully labelled diagram. If the marginal cost of producing the public good is MC = 2Q, what is the efficient quantity and how much should each consumer contribute to its provision if it were to provided at the efficient level (assuming the non-rival and non-excludable problems could be resolved)?arrow_forwardWhich of the following policies could help the government achieve the efficient outcome? Check all that apply. Introduce emission taxes Offer a subsidy to consumers equal to the vertical distance between the marginal private benefit curve and the marginal social benefit curve Implement tradable pollution permits Offer a subsidy equal to the price at the efficient outcome Offer a subsidy to producers equal to the vertical distance between the marginal private benefit curve and marginal social benefit curvearrow_forward
- Parks confer many external benefits on society: open space, trees that reduce pollution, and so on. Therefore, the market equilibrium quantity of parks is not equal to the socially optimal quantity. The following graph shows the demand for parks (their private value), the supply of parks (the private cost of producing them), and the social value of parks, including both the private value and external benefits. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. (?) Supply (Private Cost) Market Equilibrium Socially Optimal Level Social Value Demand (Private Value) QUANTITY OF PARKS PRICE OF PARKSarrow_forward24. When a good or service is Non-Rival and Non-Excludable, it is is classified as a a) Private Good b) Externality e) Club Good d) Public Good 25. An economist reasons as follows: "Time spent at home taking care of a child is time not spent earning income, so the opportunity cost of having a child includes the potential wage earnings women give up by parenting." Assuming we agreed with this, and that women enjoy children (and/or invest in them to be taken care of in retirement), we would conclude that, all else equal: b) a) in societies were wages for women's work is low, women are likely to choose to have more babies. in societies were wages for women's work is low, women are likely to choose to have fewer babies. women have too many children in poor countries economists cannot make any predictions about the determinants of population growth. c) d) 26. Digital music files can be easily and almost withor duplicated and transmitted to thousands of users who download them via free…arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Principles of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...
Economics
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning