Look at the two tables below which show respectively the

Reference no: EM13372778

Look at the two tables below, which show, respectively, the willingness to pay and willingness to accept of buyers and sellers of 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.

Consumers			Producers
Person	Maximum Price Willing to Pay	Actual Price (Equilibrium Price)	Person	Minimum Acceptable Price	Actual Price (Equilibrium Price)
Bob	$16	$10	Carlos	$5	$10
Barb	14	10	Courtney	6	10
Bill	13	10	Chuck	7	10
Bart	12	10	Cindy	8	10
Brent	11	10	Craig	9	10
Betty	10	10	Chad	10	10

a. Given the equilibrium price of $10, what is the equilibrium quantity given the data above?

Equilibrium quantity = bags

b. 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? Q* =

c. 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 $3-perbag tax on sellers.

What is the new equilibrium price ? P* = $

What is the new equilibrium quantity? Q* = bags

If the new equilibrium quantity is the optimal quantity, by how many bags were oranges being overproduced before?

Q* = bag

Reference no: EM13372778

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