EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 5.A, Problem 1AP
Sub part (a):
To determine
The net benefits of the individuals.
Sub part (b):
To determine
The net benefits of the individuals.
Sub part (c):
To determine
The net benefits of the individuals.
Sub part (d):
To determine
The net benefits of the individuals.
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3. Assume a city of 1,000,000 people, 60% of whom are willing to pay $1 maximum
(each) to clean up pollution. The rest of the population is wealthier and is willing to
pay $100 each to clean up pollution. Pollution clean-up costs $2,000,000. It has been
proposed that each person be taxed equally to pay for the pollution clean-up. Will
that pass a majority-rule vote? Is it desirable from the point of view of the Pareto
criterion? Is it a good idea, using the compensation principle? Which social choice
mechanism do you think is best on intuitive grounds, and why?
2. In this problem, you will compare the level of a public good chosen under majority voting to the socially-optimal level under three different sets of circumstances. Suppose first that individual i's demand curve for z is given by αi/z, where αi is a positive parameter. Instead of being linear, this demand curve is a hyperbola. Suppose further that z costs $1 per unit to produce (c = 1) and that this cost is shared equally among consumers. Therefore, cost per person is 1/n per unit of z. Then consider the three sets of circumstances listed below. Each situation has a different number of consumers in the economy and different collections of α values for the consumers. The number of consumers is denoted n and the vector of α values is denoted A = (α1,α2,...,αn-1,αn). Case 1: n = 7, A = (4, 2, 12, 4, 5, 13, 8). Case 2: n = 5, A = (10, 6, 11, 14, 8). Case 3: n = 9, A = (6, 9, 10, 4.5, 12, 7, 13.5, 8, 11). Using this information, do the following:
a)For each case, compute the preferred z…
Question 22
Let Q be quantity of beer (in packs) consumed in the US. Assume beer consumption imposes a negative externality of $30 per pack. The private demand for beer is P=150-2Q while the private supply curve is P=Q. If the government impose a $30 tax per pack
what is the change in total surplus from before to after the imposition of the tax.
-$150
beer,
$150
O $1.350
o 51,350
Chapter 5 Solutions
EP ECONOMICS,AP EDITION-CONNECT ACCESS
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