EBK MICROECONOMICS
2nd Edition
ISBN: 9780134458496
Author: List
Publisher: VST
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Question
Chapter 9, Problem 10P
(a)
To determine
Whether the fireworks display be offered or not.
(b)
To determine
Whether any individual will display on their own or not.
(c)
To determine
The number of people who will vote to display if each person is taxed at $20.
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Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine
how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of
the park. The cost to build the park is $21 per acre. The government wants to tax each person $7 to build each acre ($21/3). How
many acres will be built if majority rules.
Sophia
$10
Acres
Amber
Cedric
$24
18
$6
2
3.
14
4.
3.
8.
1
6.
2
Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer
3 acres, total surplus $50
b.
2 acres, total surplus $29
2 acres total surplus $125
1 acres total surplus 59
Suppose there are three people in society who vote on whether the government should undertake specific projects. Let the net benefits of a particular project be $150, $140, and $50 for persons A, B, and C, respectively.
a. If the project costs $300 and these costs are to be shared equally, would a majority vote to undertake the project? What would be the net benefits to each person under such a scheme? Would total net benefits be positive?
b. Suppose the project cost $375 and again costs were to be shared equally. Now would a majority vote for the project and total net benefits be positive?
c. Suppose (presumably contrary to fact) votes can be bought and sold in a free market. Describe what kinds of results you might expect in part a and part b.
An important question in economics is how to minimize the total cost of pollution reduction (called
the abatement cost, which is considered a "cost to society"). Two companies, Fim 1 and Firm 2,
each emit 10 units of pollution per year. The table below shows the total cost for each company to
reduce its pollution to a given value x. Due to technology differences, is more expensive for Fim
2 to reduce pollution than for Firm 1. When x = 10, no abatement has occurred (it is "business as
usual"); when x = 0, no pollution is emitted.
The table also shows an algebraic formula for each abatement cost. (BTW, it is a common
economic approximation that abatement cost goes up quadratically.)
Below, we solve this for two firms, but the method is applicable to a situation with multiple firms.
Per-firm pollution emissions x
Firm 1 total abatement cost = (10-x)
where x is the amount of pollution
Firm 2 total abatement cost = (20-2x)
where x is the amount of pollution
1.
3.
4.
9.
7.
8.
6.
10
100
81…
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