Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 9, Problem 6P
(a)
To determine
The equilibrium level of nets produced using demand and supply curves and also determine whether the private market for ITNs (Insecticide-treated nets) has the socially efficient outcome.
(b)
To determine
The effect of ITNs on poverty and its effects on output.
(c)
To determine
The reason by which government can be encouraged for the efficient production of nets.
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The government would like to introduce a subsidy to help citizens who need their car for work and cannot afford to buy a ULEZ-compliant car. It also wants to ensure that only citizens who need to drive their car regularly use the subsidy. Instead of the two groups of citizens discussed above, we focus on one particular citizen who does not drive very often, only once a year. As a result, this citizen does not emit excessive pollution even with a car that is not ULEZ-compliant. The government would therefore prefer citizens like her not to buy a new car to avoid having to pay the subsidy unnecessarily.
Once a year, the citizen derives a benefit of driving through the ULEZ area of B = 20. She can choose to either buy a new ULEZ-compliant car at a cost of C = 10, 000, denoted x = new, or stick with her old car at no cost, denoted x = old.
5
If she sticks with her old car, she has to pay a ULEZ fee of τ = 12.50 on the day that she drives. Her net benefit of driving on that day is…
The government would like to introduce a subsidy to help citizens who need their car for work and cannot afford to buy a ULEZ-compliant car. It also wants to ensure that only citizens who need to drive their car regularly use the subsidy. Instead of the two groups of citizens discussed above, we focus on one particular citizen who does not drive very often, only once a year. As a result, this citizen does not emit excessive pollution even with a car that is not ULEZ-compliant. The government would therefore prefer citizens like her not to buy a new car to avoid having to pay the subsidy unnecessarily. Once a year, the citizen derives a benefit of driving through the ULEZ area of B = 20. She can choose to either buy a new ULEZ-compliant car at a cost of C = 10, 000, denoted x = new, or stick with her old car at no cost, denoted x = old.If she sticks with her old car, she has to pay a ULEZ fee of τ = 12.50 on the day that she drives. Her net benefit of driving on that day is therefore…
Chapter 9 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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