Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 5P
Subpart (a):
To determine
The market demand for public and private goods.
Subpart (b):
To determine
The market demand for public and private goods.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
On the basis of the three individual demand schedules in the following table, and assuming these three people are the only ones in the society, determine (a) the market demand schedule on the assumption that the good is a private good and (b) the collective demand schedule on the assumption that the good is a public good.
On the basis of the three individual demand schedules below, and assuming these three people are the only ones in the society, determine ( a) the market demand schedule on the assumption that the good is a private good and (b) the collective demand schedule on the assumption that the good is a public good. Explain the differences, if any, in your schedules.
Consider a situation where Barack (B) and Michelle (M) have demands for a public good that can be represented by the following functions:
D_B: Q_B = 24 - 2P_B
D_M: Q_M = 18 - 2P_M
If Barack and Michelle are the only two consumers of this public good and the supply function for the good is:
S: Q = -1 + P
What is the socially optimal quantity of the public good?
Chapter 4 Solutions
Macroeconomics
Ch. 4.A - Prob. 1ADQCh. 4.A - Prob. 2ADQCh. 4.A - Prob. 3ADQCh. 4.A - Prob. 1ARQCh. 4.A - Prob. 2ARQCh. 4.A - Prob. 3ARQCh. 4.A - Prob. 1APCh. 4 - Prob. 1DQCh. 4 - Prob. 2DQCh. 4 - Prob. 3DQ
Ch. 4 - Prob. 4DQCh. 4 - Prob. 5DQCh. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - Prob. 8DQCh. 4 - Prob. 9DQCh. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Use marginal cost/marginal benefit analysis to...Ch. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7P
Knowledge Booster
Similar questions
- (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.arrow_forwardSuppose there are two residents in a neighborhood, and you know both of their demand curves for a public good. What would you have to do in order to figure out what the social demand curve? a-Subtract the demand of the person with the higher valuation of the public good from the demand of the person with the lower valuation of the public good b-Add their demand curves together c-Multiply the two demand curves together d-Subtract the demand of the person with the lower valuation of the public good from the demand of the person with the higher valuation of the public goodarrow_forwardConsider a public good that has 2 consumers, Dylan and Fred. Dylan’s demand for the public good is higher than Fred’s demand for the good. Show graphically and explain why the private market will provide an inefficient level of that public good.arrow_forward
- Education confers many external benefits on society: a higher-paid workforce, more technological innovation, a more informed electorate, and so on. Therefore, the market equilibrium quantity of education is not equal to the socially optimal quantity. The following graph shows the demand for education (its private value), the supply of education (the private cost of producing it), and the social value of education, 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.arrow_forwardSuppose there are two residents in a neighborhood, and you know both of their demand curves for a public good. What would you have to do in order to figure out what the social demand curve? A.Multiply the two demand curves together B.Add their demand curves together C.Subtract the demand of the person with the lower valuation of the public good from the demand of the person with the higher valuation of the public good D.Subtract the demand of the person with the higher valuation of the public good from the demand of the person with the lower valuation of the public goodarrow_forwardConsider the market illustrated in the figure to the right. Supply curve Upper S 1 represents the private cost of production and demand curve Upper D 1 represents the private benefit from consumption. Suppose production of this good creates a negative externality... Show how the externality affects the market. 1.) Use the line drawing tool to draw either a new supply (Upper S 2) or demand (Upper D 2) curve incorporating the negative externality in production . Properly label this line. 2.) Use the point drawing tool to indicate the market equilibrium price and quantity. Label this point 'Market equilibrium'. 3.) Use the point drawing tool to indicate the efficient equilibrium price and quantity. Label this point 'Efficient equilibrium'. Carefully follow the instructions above, and only draw the required objects.arrow_forward
- 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?arrow_forwardConsider the production and sale of Good B. Suppose that the “Social Value” of each unit of Good B is greater than the “Willingness to Pay” of the individual who consumes that unit. There are NO externalities associated with the production or consumption of Good B, and Good B is sold in a competitive market. Suppose that the “Efficient” level of output for Good B is 400,000 units. Is the market equilibrium level of output greater than 400,000, less than 400,000, or equal to 400,000 ( just circle your answer; you don’t have to explain)?arrow_forwardConsider a public good that has 2 consumers, Dylan and Fred. Dylan’s demand for the public good is higher than Fred’s demand for the good. Show graphically and explain why the private market will provide an inefficient level of that public good. Please Help!!!!!!!!arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Principles of MicroeconomicsEconomicsISBN:9781305156050Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Microeconomics
Economics
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:Cengage Learning