Question

Consider a city with three consumers:1, 2, and 3. The city provides park land for the enjoyment of its residents. Parks are a public good, and the amount of park land (which is measured in acres) is denoted by z. The demands for park land for the three consumers are as follows:

D1=40-z

D2=30-z

D3=20-z

These formulas give the height of each consumer's demand curve at the given level of z. Note that each demand curve cuts the horizontal axis, eventually becoming negative. For the problem to work out right, you must use this feature of the curves in deriving De. In other words, don't assume that the curve becomes horizontal curve once they hit the axis.

A) The height of the De curve at a given z is just the sume of the heights of the individual demands at that z. Using this fact, compute the expression that gives the height up to the De curve at each z.

B)The cost of park land per acre, denoted by c, is 9 (like the demand intercepts, you can think of this cost as measured in thousands of dollars). Given the cost of park land, compute the socially optimal number of acres of park land in the city.

C)Compute the level of social surplus at the optimal z. This is just the area of the surplus triangle between De and the cost line.

D)Suppose there are two other jurisdictions, each with three consumers, just like the given jurisidiction. Compute total social surplus in the three jurisdictions, assuming each chooses the same amount of park acres as the first jurisdiction.

E) Now suppose the population is reorganized into three homogrenous jurisdictions. The first has three type-1 consumers (i.e, high demanders). The second has three type-2 consumers (medium demanders), and the third has three type-3 consumers (low demanders). Repeat (a), (b), and (c) for each jurisdiction, finding the De curve, the optimal number of park acres, and social surplus in each jurisdiction.

F)Compute total social surplus by summing the social surplus results from (e) across jurisdictions. How does the answer compare with social surplus from (d)? On the basis of your answer, are homogeneous jurisdictions superior to the original mixed jurisdictions?

G)If the social optimal is determined by majority voting, what will the outcome be? Does this match the social optimal?

Answer #1

Ques 1: A single community is comprised of just three voters i =
{1, 2, 3}, each of whom have differing tastes for public parks, as
described by the following three demand functions. q1 = 100 – 2p q2
= 110 – 2p q3 = 126 – 2p (a) Public parks are a local public good.
Assuming that the marginal cost to society, mcs, of providing each
unit of park space is $90, what is the socially optimal quantity of...

Consider a monopolist facing two types of consumers. Normalise
the total population to 1. Type one consumers are in proportion
1/2, and type two are in proportion 1/2. The monopolist has
marginal cost of production c = 1/2. The two types have demand
curves
q₁ =1-p
q₂ =1-(p/2).
If the monopolist can identify the two types and can charge
different two-part tariffs to different types: {A1, p1} and {A2,
p2}. [All type one consumers are identical and have the q1...

Table 11-1
14. Consider the town of Springfield with only three residents,
Sophia, Amber, and Cedric. The three residents are trying to
determine how large, in acres, they should build the public park.
The table below shows each resident’s willingness to pay for each
acre of the park.
Acres
Sophia
Amber
Cedric
1
$10
$24
$6
2
8
18
5
3
6
14
4
4
3
8
3
5
1
6
2
6
0
4
1
7
0
2
0...

1. Consider a firm that manufactures dyed textiles. The firm
incurs a marginal cost of MC = 2Q. Suppose that for every textile
produced, there is an externality cost of 12 (from dyes being
leaked into the water). So the true social marginal cost of widget
production is MC = 2Q + 12. Imagine that the demand curve for
textiles is given by QD = 30-P.
(a) Imagine that the government taxes consumers $12 per widget
purchased. What does the...

Consider a publicly available technology of producing a good
that is characterized by the variable cost function VC (Q) =
(1/2)Q2 and fixed costs FC = 2 for a firm that operates
the technology. In the short run, fixed costs are unavoidable. In
the long run, fixed costs are avoidable and it is free for any firm
outside of the market to enter, should it want to. In the short
run, the set of firms in the market is fixed....

−
Consider the demand for the photographic film industry discussed
by McLaren in the textbook. Suppose that there are two countries,
the US and Japan, each with one maker of film, namely Kodak in the
US and Fuji in Japan. The demand curve for film in each country is
given by the equation Q = 280- P , where P
represents the price of film and Q the quantity sold. (As far as
consumers are concerned, there is no difference...

Assume that the City Council in Prescott, Arizona is considering
implementing price ceilings on rental units based on the number of
bedrooms in the unit. The demand function for rental units (on a
single bedroom equivalent basis) is given by QD = 120 –
4P and the supply function is given by QS = 2P, where P
is price and Q is quantity. The Council is considering imposing a
ceiling price on rental units of Pmax = 16.
1. Using...

In this exercise, you will analyze the supply-demand equilibrium
of a city under some special simplifying assumptions about land
use. The assumptions are: (i) all dwellings must contain exactly
1,500 square feet of floor space, regardless of location, and (ii)
apartment complexes must contain exactly 15,000 square feet of
floor space per square block of land area. These land-use
restrictions, which are imposed by a zoning authority, mean that
dwelling sizes and building heights do not vary with distance to...

Answer Questions 2 and 3 based on the following LP
problem.
Let P1 = number of Product 1 to be
produced
P2 =
number of Product 2 to be produced
P3 =
number of Product 3 to be produced
Maximize 100P1 + 120P2 +
90P3 Total
profit
Subject to
8P1 + 12P2 + 10P3 ≤
7280 Production budget
constraint
4P1 + 3P2 + 2P3 ≤ 1920 Labor
hours constraint
P1
> 200 Minimum
quantity needed...

ECO 101-S70: Final Quiz 2
CHAPTER 3: Demand, Supply and Equilibrium
1. Which of the following could cause a decrease in consumer
demand for product X?
a. a decrease in consumer income
b. an increase in the prices of goods which are good
substitutes for product X
c. an increase in the price which consumers expect will prevail
for product X in the future
d. a decrease in the supply of product X
2. If two goods are substitutes for...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 37 minutes ago

asked 42 minutes ago

asked 47 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago