Practice: Suppose that are two people considering purchasing a public good. For each quantitypurchased(Q), each individual gains a marginal benefit given by the following: Person 1:MB-12-Q.Person 2:MB2-24-2Q. The Marginal Cost of each unit of Qis given by MC-2QGiven the above, answer the following questions:a) If each person had to buy their own quantity of the public good how much would each person want topurchase? How much would end up being purchased privately? Q togetherb) Write down the Social Marginal Benefit Curve. What is the socially optimal equilibrium quantity?Now suppose for Part c that we are at the private market equilibrium. which is your answer from Part a.The government wants to step in and tax each of these individuals and use the raised revenue to purchaseanother unit of this good. Each individual can be taxed a different amountc) Propose a tax that will both (i) allow enough money to be raised for this additional unit of the publicgood and (ii) will make both Person 1 and Person 2 better off. How much will each of them pay?

Given that Marginal Benefit of Person 1 = 12 - QMarginal Benefit of Person 2 = 24 - 2QMarginal Cost,…

Answered: Practice: Suppose that are two people…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 3PA

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Suppose 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)?
Consider a public good, G, that is shared by Consumer A and B. Each can purchase G at the price of $20 per unit. A's marginal benefit from this public good is given by MBA-50-G. If A thinks B is getting 10 units of G, then A's optimal contribution into G will be units. On the other hand, if A thinks B is getting 20 units of G, then A's optimal contribution into G will be units. Blank # 1 Blank # 2 A/ N
Evaluate the following statement: "When it comes to public goods, individuals do not reveal their true preferences because it is not in their self-interest to do so." Please answer fast... It's urgent
1. Suppose 20 people each have the demand Q = 20 − P for streetlights and 5 people have the demand Q = 18 − 2P for streetlights. The cost of building each streetlight is $10.a. Write the social marginal benefit equation: MBS = _______ - _________ Q/2. Hint: Type integers.b. The socially optimal number of street lights is ________. Hint: Type the number in two decimal places. 2. The __________ theorem states: As long as negotiation costs are negligible and affected consumers can negotiate freely with each other, the court could allocate the entitlement to either party, and an efficient allocation would result. Hint: The answer is case sensitive. PLEASE FILL OUT THE SPACES
Q: The consumption of pies doesn't generate any externalities, but the production of pies generate positive externalities. A. Draw a diagram of a positive externality that occurs in production. Please be sure to label all of your curves and axes, explain the market quantity and the efficient quantity and what area is the dead weight loss. B. Explain, in a sentence or two, why there might be a positive externality associated with the production of Pies.
2. Suppose the Harrisonburg city council is concerned about the increase in crime in the city. Crimes in H'burg are inefficient in the sense that it costs society $20,000 more than the benefits to the criminal. If an offender is caught, tried and convicted they are sent to jail. Assume that the total social cost of trial, conviction, and punishment is $150,000 per criminal caught. The council is considering hiring additional police officers dedicated to detecting crime. This change would increase the fraction of offenders who are caught from 20% to 30%. The city estimates that this will decrease the number of crimes from 2,000 a year to either 1,200 or 1,600 per year. For each case: 1,200 or 1,600: For each question, make sure you justify your work and provide a clear explanation. a. What happens to the social cost of crimes committed? b. What happens to the cost of trying, convicting, and punishing offenders? c. What is the most that the city should be willing to pay for the new…
Public goods is an example of a so called "market imperfection". Define and describe what characterizes a public good. Give an example of what a public good can be. Discuss and describe what problems could occur in the case of public goods. Describe in what way problems about public goods can partly be connected to morality and - because of this – create problems for society. Finally – in short – discuss how an unregulated situation with public goods can run the risk of being “myopic" (that is “near sighted" or thinking "short term") in its use of the resource. Motivate your answer
. What kind of good is it? Classify each of the following goods listed in the table below as a public good, a private good, a club good, or a common resource. Public Good Private Good Club Good Common Resource A new drone that you take turns flying with your friends A large, beautiful greenspace in a town plaza A parking spot along a residential street that is open to the public
19. This next question will require you to draw on what you have learned about supply and demand and taxes. A study finds that leaf blowers make too much noise; therefore it is considered a externality, so the government imposes a $10 tax on the sale of every unit to correct for the social cost of the noise pollution. The tax completely internalizes the externality. Before the corrective tax, Leaves are Us Manufacturing regularly sold blowers for $100 and market quantity is 300. Draw the supply and demand curve for leaf blowers. Label the axes, the curves, market price, market quantity, and equilibrium. Which curve represents private or internal costs? represents external and private costs? This is also known as What is the private market price? What is the private market quantity? Which curve costs. After the tax is in place, the consumer price of leaf blowers rises to $105. With this change in price, the number of leaf blowers will (decrease/increase). Why will this happen?
3. Now reconsider the issue of soybeans from the perspective of Chinese consumers. Assume you are a Chinese consumer who drinks soymilk each day. Demonstrate using a graph how your consumption of soymilk differs from the socially optimal level. Is the price you pay for soymilk in current market conditions the correct amount, too high, or too low? Why? Ensure that you label your graph correctly (all curves, axes, price and quantities labeled). Show the deadweight loss of soymilk consumption, and what price should be charged for soymilk to move the amount of soymilk you drink to the optimal level.
QUESTION 5 Suppose 20 people each have the demand Q = 20-P for streetlights and 5 people have the demand Q = 18-2P for streetlights. The cost of building each streetlight is $10. a. Write the social marginal benefit equation: MBS = Type integers. b. The socially optimal number of street lights is places. Q/2. Hint Hint: Type the number in two decimal socum
4. 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 quantity of cars is not equal to the efficient quantity. The following graph shows the private demand for cars, the private supply of cars, and the social supply of cars, which incorporates both private costs and external costs. Use the black point (plus symbol) to indicate the market quantity. Next, use the purple point (diamond symbol) to indicate the socially optimum quantity. Note: Drop lines will extend to both axes automatically. DERIVATE QUARKET O5OCIAL SSOCIAL SPRVATE QUANTITY OF CARS From society's standpoint, the market is producing cars. This is an example of of resources. PRICE OF CARS

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