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 2 Jenny Q Salo 10 10 5 25 35 40 2 70 80 90 100 45 1 0 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 $ b. In order for Jenny and Salo to purchase 60 fireworks, a tax of $ should be imposed. Under this tax, Jenny will purchase fireworks and Salo will purchase fireworks. c. Under a tax, after the tax is subtracted, the net marginal benefit of the last firework for Jenny is $ and for Salo $

Answer 1

Solution:-

(a). If a quota of 30 fireworks per person is imposed, Jenny is willing to pay $7 for her last firework.
Salo is willing to pay $4 for his last firework. Salo’s net marginal benefit is $4.

(b). In order for Jenny and Salo to purchase 60 fireworks, a tax of 6 should be imposed as Jenny will purchase 40 and Salo will purchase 20 so 40+20=60, where tax = 6

(c). Under a tax after the tax is subtracted the net marginal benefit of the last firework for Jenny is 0 and for Salo is 0

Net marginal benefit	Net marginal benefit after subtracting the tax
10	10-6=4
9	9-6=3
8	8-6=2
7	7-6=1
6	6-6=0