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How would these questions relating to supply, demand market equilibrium and surplus be solved? i. Now suppose that (in addition to the change specied in

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How would these questions relating to supply, demand market equilibrium and surplus be solved?

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i. Now suppose that (in addition to the change specied in part h.) the cost of grain for the dairy cows increases. What would happen in the market for dairy milk? Illustrate this change on the graph in part b. Be sure to label the resulting change in equilibrium price and quantity once this market reaches its new equilibrium. j. Consider the results from part i. Relative to the equilibrium price and quantity in part a, can we say for sure without additional information whether the price increased or decreased? What about the quantity? k. Now let's return to the original supply and demand anctions before the changes in h. and i. Suppose there is a negative externality in the market. The marginal cost of the negative externality is $3 per gallon of milk. What is the socially optimal quantity of milk? What is the deadweight loss associated with the market equilibrium quantity? Draw a new graph to illustrate the socially optimal outcome relative to the market equilibrium outcome. Label the DWL associated with the market outcome. 2) Jay and Dee are neighbors. Jay is in a band and practices the drums constantly. Dee loves to take naps throughout the day and can't stand the constant drumming. It would be possible for Jay to soundproof his practice studio, however he believes it negatively affects the acoustics. Jay benets $200 if his practice studio is soundproofed and $250 if it isn't. Dee benets $50 if Jay's practice studio is soundproofed and $50 if it isn't. a. Assuming all of the costs and benets associated with this scenario are represented above, what is the socially optimal outcome? b. Suppose Jay has the legal right to make any amount of noise he wants. If he and Dee can negotiate at no cost, will he install soundproong? Explain. c. Now suppose that Jay and Dee hate communicating with each other. Again, Jay has the right to make noise. If the cost to Dee of negotiating with Jay is $60, will Jay install soundproong? Explain

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