100%(21)21 out of 21 people found this document helpful
This preview shows page 12 - 14 out of 18 pages.
b. Derive the collective demand schedule on the assumption that the good is a public good. To 10.Look at the tables below, which show, respectively, the willingness to pay and willingness to accept of buyers and sellers of individual bags of oranges. For the following questions, assume that the equilibrium price and quantity will depend on the indicated changes in supply and demand. Assume that the only market participants are those listed by name in the two tables.PersonMaximum Price Willing ToPayActual EquilibriumPricePersonMinimumAcceptablePriceBob$13$8Carlos$3
Barb128Courtney4Bill118 ChuckBart108Cindy6Brent98Craig7Betty88Chad810 a. Given the equilibrium price of $8, what is the equilibrium quantity given the data above?5b.What if, instead of bags of oranges, the data in the two tables dealt with a public good like fireworks displays? If all the buyers free ride, what will be the quantity supplied by private sellers?10c. Assume that we are back to talking about bags of oranges (a private good), but that the government has decided that tossed orange peels impose a negative externality on the public that must be rectified by imposing a $2-per-bag tax on sellers. What is the new equilibrium price?What is the new equilibrium quantity?Q* = 5 bags If the new equilibrium quantity is the optimal quantity, by how many bags were oranges being overproduced before?Q* = 1 bag Explanation