Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hello, I would like some help to solve this question please! 1. [30 points] Three people live around a coal-red power plant. Each individual has

Hello, I would like some help to solve this question please!

image text in transcribed
1. [30 points] Three people live around a coal-red power plant. Each individual has a different sensitivity to air pollution, therefore, each has a different willingness-to-pay for clean air. The following equations describe their willingness-to-pay [WTF], where Q is the level of clean air. a = Ion0.5m Us we The marginal cost of cleaning up the air is given by, M0 = 0.5!? + 140 (a) Derive graphically and algebraically the aggregate demand function for clean air and nd the socially e'icient level of clean air. (b) Calculate each individual 's total benet, the total cost and the total net benet at the socially efcient level of clean air. (c) If individual C decide-3 to free ride and contribute zero, derive graphically and algebraically the aggregate demand function. What is the socially e'icient level of clean air? 1Wl'iat do you observe? (d) Assume now that no one free-rides, however, due to a technological progress the marginal cost of cleaning up the air becomes MC = [LEG +1010. Find the socially efficient level of clean air. How much is each individual willing to pay for the socially efcient level of clean air

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Marketing

Authors: Shane Hunt

3rd Edition

1260800458, 9781260800456

More Books

Students also viewed these Economics questions

Question

1. Build trust and share information with others.

Answered: 1 week ago