Question

Suppose certain fireworks are legal in a residential area on Canada Day. The fireworks have been approved for safety, but they do cause noise pollution so their use must be limited. Jenny and Salo like to purchase fireworks for their families; the table below shows the net marginal benefit that Jenny and Salo gain from each firework they purchase. Net marginal benefit Q Salo 10 9 8 Jenny 0 10 20 30 40 50 20 25 30 3 60 70 80 2 1 90 100 45 50 Instructions: Enter your answers as whole numbers. a. If a quota of 30 fireworks per person is imposed, the marginal benefit of the last firework for Jenny is $ The marginal benefit of the last firework for Salo is $ 4. b. In order for Jenny and Salo to purchase 60 fireworks, a tax of $ 6 should be imposed. Under this tax, Jenny will purchase 40 fireworks and Salo will purchase 20 fireworks. and for c. Under a tax, after the tax is subtracted, the net marginal benefit of the last firework for Jenny is $ Salo $

Answer 1

a) Answer to blank 1: $7

Answer to blank 2: $4

b) Answer to blank 1: $6

Answer to blank 2: 40

Answer to blank 3: 20

Explanation:

When the government wants no more than 60 total fireworks to be purchased, from the table it is seen that at $6, total quantity is 40 + 20 = 60. Therefore, the government should impose a tax of $6.

c) Answer to blank 1: $0    [i.e., $6 - $6 = $0]

Answer to blank 2: $0        [i.e., $6 - $6 = $0]