E202Exam3.3

E202Exam3.3 - efficiency in this market? 6. (5pts) Suppose...

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Chapter 11 5. (10 pts) Suppose the supply curve of boom box rentals on Golden State Park is given by P = 10 + 0.1 Q , where P is the daily rent per unit in dollars and Q is the number of units rented in hundreds per day. The demand curve for boom boxes is P = 25 - 0.2 Q . a. If each boom box imposes $3 per day in noise costs on others, by how much will the equilibrium number of boom boxes rented exceed the socially optimal number? b. How would the imposition of a tax of $3 per unit on each daily boom box rental affect
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Unformatted text preview: efficiency in this market? 6. (5pts) Suppose the law says that Jones may not emit smoke from his factory unless he gets permission from Smith, who lives downwind. If the relevant costs and benefits of filtering the smoke from Joness production process are as shown in the following table, and if Jones and Smith can negotiate with one another at no cost, will Jones emit smoke? Jones emits smoke Jones does not emit smoke Surplus for Jones $200 $160 Surplus for Smith 400 450...
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