Reference no: EM13110294
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