Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

ASSIGNMENT 1

Q1.

Assume that the demand curve for an environmental good is fully coincidental with the marginal social benefit function and can be described as MSB = MPB = 12-3q, where q refers to the quantity of the good. Assume that the marginal private cost function can be described by MPC = q, and that marginal social costs are always triple the marginal private cost.

A. Determine an equation for the marginal social costs (MSC).

B. Graph the functions and algebraically determine

i. the market level of output

ii. ii. the optimal level of output 

C. Calculate social welfare at the market level of output and at the optimal level of output. What is the deadweight loss from these social costs?

(4 Points)

Q2: Suppose the state is trying to decide how many miles of a very scenic river it should preserve. There are 100 people in the community, each of whom has an identical demand function given by P=10-1.0q, where q is the number of miles preserved and P is the per mile price he or she is willing to pay for q miles of preserved river. Hint: treat this river as a public good.

A. If the marginal cost of preservation is $500 per mile, how many miles would be preserved in an efficient allocation?

B. What are the net benefits associated with the preservation project? (3Points)

Q3. Assume that the data you have suggest that if:

i. Travel cost is greater than or equal to $30, no trips are taken

ii. If travel costs are zero, 100 trips are taken.

A. Draw a travel cost demand curve based on these data.

B. Calculate ordinary consumer surplus for the individual whose travel costs

are equal to $14.

C. Explain potential biases your analysis may have included.

                                (3Points)