The many identical residents of Whoville love drink-ing
Chapter , Problem 6(choose chapter or problem)
The many identical residents of Whoville love drink-ing Zlurp. Each resident has the following willingness to pay for the tasty refreshment:First bottle$5Second bottle 4third bottle3Fourth bottle2Fifth bottle1Further bottles 0a.The cost of producing Zlurp is $1.50, and the competitive suppliers sell it at this price. (The sup-ply curve is horizontal.) How many bottles will each Whovillian consume? What is each persons consumer surplus?b.Producing Zlurp creates pollution. Each bottle has an external cost of $1. Taking this additional cost into account, what is total surplus per person in the allocation you described in part (a)?c.Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by one bottle. What happens to Cindys welfare (her consumer surplus minus the cost of pollution she experiences)? How does Cindys decision affect total surplus in Whoville?d.Mayor Grinch imposes a $1 tax on Zlurp. What is consumption per person now? Calculate consumer surplus, the external cost, government revenue, and total surplus per person e.Based on your calculations, would you support the mayors policy? Why or why not?
Unfortunately, we don't have that question answered yet. But you can get it answered in just 5 hours by Logging in or Becoming a subscriber.
Becoming a subscriber
Or look for another answer