Consider the file named Public Goods Graphs. It shows the marginal private benefits (MPB) derived by three citizens from different units of a public good such as a fire station, another military base, or a new freeway. It also shows the marginal social costs of building these goods. Suppose that when the government employees survey the citizens about their preferences for the public good, every citizen understates his or her marginal private benefit for every unit of the good by $20. If the government builds the number of public goods indicated by the survey (believing that that is allocatively efficient), the deadweight loss arising from this policy will equal dollars. For this question, don't use the geometric formula to calculate the area. Just add the differences between the true marginal social benefits and the marginal social costs for different units. Use our general rounding rule.

Consider the file named Public Goods Graphs. It shows the marginal private benefits (MPB) derived by three citizens from different units of a public good such as a fire station, another military base, or a new freeway. It also shows the marginal social costs of building these goods. Suppose that when the government employees survey the citizens about their preferences for the public good, every citizen understates his or her marginal private benefit for every unit of the good by $20. If the government builds the number of public goods indicated by the survey (believing that that is allocatively efficient), the deadweight loss arising from this policy will equal dollars. For this question, don't use the geometric formula to calculate the area. Just add the differences between the true marginal social benefits and the marginal social costs for different units. Use our general rounding rule.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter13: Positive Externalities And Public Goods

Section: Chapter Questions

Problem 24P: Assume that the marginal private costs of a film producing fuel-efficient can; is greater than the...

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Assume that the marginal private costs of a film producing fuel-efficient can; is greater than the marginal social costs. Assume that the marginal private benefits of a firm producing fuel efficient cars are the same as the marginal social benefits. Discuss one wags.r that the government cans ï¬‚y to increase production and sales of fuel efficient cars to the socially desirable amount. Hint: the government is flying to affect production through costs, net benefits.
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