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1. Shortly explain the relationship between elasticity of a good and the consumption tax rate it should be imposed upon it.
2. What do we man by rivalry of a good? Give examples of rival and non-rival goods. To what extent is rivalry a crucial aspect of a public good?
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- (Negative Externalities) Suppose you wish to reduce a negative externality by imposing a tax on the activity that creates that externality. When the amount of the externality produced per unit of output increases as output increases, the correct tax can be determined by using a demand-supply diagram; show this. Assume that the marginal private cost curve slopes upward. Negative Externalities: The Market for Electricity in the Midwest:Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?2) The following table shows how the marginal benefit of a service varies for five consumers. 田 Quantity 1 4 Samuel 150 125 100 75 Adam 125 100 75 50 Bronn 100 75 50 25 Michael 200 150 125 125 Matt 600 400 200 150 a) Derive the demand curve for this service assuming that it is a public good. b) If marginal cost of the good is 850, what is the efficient output of the public good? c) If marginal cost of the good is 425, what is the efficient output of the public good? d) If marginal cost of the good is &850, what is the efficient output assuming it is private good?
- 2) The following table shows how the marginal benefit of a service varies for five consumers. Quantity 1 4 Serkan 150 125 100 75 Asuman 125 100 75 50 Bahar 100 75 50 25 Murat 200 150 125 125 Meriç 600 400 200 150 a) Derive the demand curve for this service assuming that it is a public good. b) If marginal cost of the good is 850, what is the efficient output of the public good? c) If marginal cost of the good is 425, what is the efficient output of the public good? d) If marginal cost of the good is 850, what is the efficient output assuming it is private good?The following table shows how the marginal benefit of a service varies for five consumers. Quantity 1 2 3 4 Serkan 150 125 100 75 Asuman 125 100 75 50 Bahar 100 75 50 25 Murat 200 150 125 125 Meriç 600 400 200 150 Derive the demand curve for this service assuming that it is a public good. If marginal cost of the good is 850, what is the efficient output of the public good? If marginal cost of the good is 425, what is the efficient output of the public good? If marginal cost of the good is 850, what is the efficient output assuming it is private good?The following table shows how the marginal benefit of a service varies for five consumers. Quantity 1 Serkan Asuman Bahar Murat Meriç 3 100 75 50 125 200 4 75 50 25 125 150 150 125 100 200 600 a. Derive the demand curve for this service assuming that it is a public good. If marginal cost of the good is 850, what is the efficient output of the public good? c. If marginal cost of the good is 425, what is the efficient output of the public good? d. If marginal cost of the good is 850, what is the efficient output assuming it is private good? 125 100 75 150 400 o.
- The following table shows how the marginal benefit of a service varies for five consumers. Quantity Serkan Asuman Bahar 1 150 125 100 200 600 Derive the demand curve for this service assuming 2 125 100 75 150 400 3 100 75 50 125 200 Murat Meriç that it is a public good. If marginal cost of the good is 850, what is the efficient output of the public good? If marginal cost of the good is 425, what is the efficient output of the public good? If marginal cost of the good is 850, what is the efficient output assuming it is private good?Suppose that the government instituted a per-unit tax on the output of a monopoly firm. A. graph this situation? B. On the same graph show what would happen to the market equilibrium after implementation of such a tax? C. On the same graph how would you show which economic actor pays most of the tax? You are to not only draw the graph but also explain the answerConsider a market in which it production process pollute the local water source for the community.Due to lack of transparency governance, local authority does not have any regulation in place todeal with such problem. [Easier to explain when drawing a demand and supply diagrams.]a. Would this market that was characterized by unregulated (water) pollution beclassed as efficient? Why or why not? Does this mean that the consumer surplus is negative?b. In this particular case, would tradeable pollution permits consider to be a moreefficient way to reduce pollution than Government regulation? Explain your answer.
- 1. Two people have demands for public good X, where X is units and P is price per unit: Person 1 demand: X1 = 30 - 0.5P1 Person 2 demand: X2 = 20 - 0.5P2 Marginal cost to provide another unit of X is MC = 40. %3D a. Find/write the equation to represent the total (social) marginal benefit (demand) of X. In your answer, explain the difference between finding the total (social) marginal benefit (demand) for a public good compared to a private good. (Note that these demand curves are written quantity as a function of price.). Graph the curves. b. Find the efficient total quantity of X to provide. c. Find the efficient "price" to charge each person. d. Why will the competitive market likely fail to provide the efficient quantity of a public good? Explain.What do we man by rivalry of a good? Give examples of rival and non-rival goods. To what extent is rivalry a crucial aspect of a public good?10. Consider a competitive industry for a good that has a negative externality. a. How does the amount produced by a free market compare with the socially-optimal level of production? Identify the total private surplus, external costs, and total social surplus both at the level of production that occurs in a free market and at the socially- optimal level of production. What is the deadweight loss of the externality? b. Suppose the government decides to address the negative externality by banning the good entirely. What is the deadweight loss in this case? Is it possible for the deadweight loss under the government ban to be larger than in the absence of any government policy?
