Microeconomics

4. The Pandemic In this exercise we are going to analyze the effect of different public policies designed to combat the spread of COVIDlg. (a) (b) (C) (e) (f) Explain how not wearing a face mask causes a negative externality. Show that, without any regula tionJ the equilibrium level of face mask usage would be socially ineicient. (Assuming some degree of selfishness among the population) Show how a Pigovian tax in the form of ning people that don't wear a face mask may achieve the socially efcient face mask usage. What should be the value of the ne equal to'?| Some individuals refuse to wear a mask because they feel that they are loosing their freedom by doing so. In fact, they think the enforcement of government mandates to be immoral as a principle. What strategies can be used, in your opinion, to convince/motivate this set of individuals to wear a mask? Many countries and states implemented some form of lockdown system to reduce social mobility. Among the different industries affected by the lockdown, schools have to limit or end any inclass teaching and moved to online. Is there any negative externality caused by the lockdown in the market for education? Show the effect of the lockdown on the efcient level of education. What policies can be implemented to achieve efciency? Some versions of the lockdown rules included curfew hours (time in which all business should be closed, and public transit is limited only for cases of urgency). Other versions simply included suggestions for business to implement social distance policies. Let the parameter 6 E (0, 1) represent how strict are lockdown rules. Let f (0, q) = 1%:6 be a function that represents the cost of COVIDlg cases, it depends on how strict are the lockdown rules, 0, and the level of economic activity, (1. Then consider a perfectly competitive market model in which marginal cost is constant and equal to 1 in the absence of lockdown, and equal to 1 + 6 when lockdown rules are in place. Finally, consider a linear demand function qd = 2 p. Find the optimal level of 6' assuming total economic surplus is equal to consumer surplus plus f(9, q). Do you think consumers should pay for the COVID19 vaccine? Explain