Question

Question 6 (1 point) The following equations represent the MWTP (demand) function and the private MC functions in the market for some good where a negative externality (such as pollution) results in damages of $12 per unit of the good produced. MWTP 400 QD MPC 55+0.5QS The market equilibrium level of output will be equal to units. Question 7 (1 point) The following equations represent the MWTP function and the private MC function in the market for some good where a negative externality (such as pollution) results in damages of $12 per unit of the good produced. There are no positive externalities associated with this good. MWTP 400 QD MPC 55+0.5QS The socially efficient level of output for this market will be Question 8 (1 point) Suppose the styrofoam cup industry produces cups with a constant marginal cost of $4, so that the supply equation is given by MC 4. The inverse market demand equation for this product is given by MWTP 22-Q. Also, suppose that this industry produces pollution along with the cups, and that the pollution costs are represented by the marginal external cost function MEC 0.2Q. This indicates that the external cost of additional syrofoam cups produced is not constant, but increases. Assume that there are no positive externalities associated with styrofoam cups. The socially-efficient quantity of styrofoam cups will be equal Question 9 (1 point) Suppose demand for a public park (assume it is a public good) for two groups of consumers (A and B) is given by: QA 12 2P QB 8-P where Q is the number of hectares each group would like to see incorporated into the park. Aggregate WTP- Write out the expression which follows the equal sign. Do

Answer 1

At market equilibrium, m w TP = mpc 400 - Q = 55 + 0.5 Q 345 = 1.5 Q Q = 230 At social equilibrium, MwTP = mpc + MEC 400 - Q = 55 + 0.5 Q + 12 333 = 1.5 Q Q = 222 mwTP = mc + mEC 22 - Q = 4 + 0.2 Q 18 = 1.2 Q Q = 15 Q_A = 12 - 2p 2p = 12- Q implies p = 6 - 0.5 Q & Q_B = 8 - p p = 8 - Q Aggregate wTP = 6 - 0.5 Q + 8 - Q Aggregat wTP = 14 - 1.5 Q