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Unformatted text preview: Name____________________________ Section (circle one) 9:30 OR 11:00 Econ 319, Homework 1 due Jan24 Please fill in your answers on this sheet and attach your work. Supply, Demand, Externalities and Efficiency 1. a. Suppose that in the market for rose bushes, the demand curve is given by P=10- 1/8 Q and the supply curve is given by P=2+ 1/8 Q. Find the equilibrium price and quantity. b. Now suppose that there is a benefit to the neighbors of those who buy rose bushes because they increase the enjoyment of passersby and help to increase the property values in the neighborhood. The neighbors benefit by an estimated $2 per unit. Given this information, what are the socially efficient price and quantity in this market? c. Graph the supply, demand and MSB curves. Label the market equilibrium and socially efficient point. Shade the areas representing consumer surplus, producer surplus, external efficient point....
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This note was uploaded on 04/08/2008 for the course ECON 319 taught by Professor Smith during the Spring '08 term at Western Michigan.
- Spring '08