Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please answer every part clearly and draw graphs thanks Question #2: (35 marks) A local drama company proposes a new neighbourhood theatre in Vancouver. Before

Please answer every part clearly and draw graphs thanks

image text in transcribed
Question #2: (35 marks) A local drama company proposes a new neighbourhood theatre in Vancouver. Before approving the building permit, the city planner completes a study of the theatre's impact on the surrounding community. a. One finding of the study is that theatres play very loud music, which adversely affects the community. The city planner estimates that the cost to the community from the extra traffic is $7 per ticket. What kind of an externality is this? Why? (5 marks] b. Graph the market for theatre tickets, labelling the demand curve, the social-value curve, the supply curve, the social-cost curve, the market equilibrium level of output, and the efficient level of output. Also show the per-unit amount of the externality. (10 marks) c. On further review, the city planner uncovers a second externality. Rehearsals for the plays tend to run until late at night, with actors, stagehands, and other theatre members coming and going at various hours. The planner has found that the increased foot traffic improves the safety of the surrounding streets, an estimated benefit to the community of $10 per ticket. What kind of externality is this? Why? (5 marks) d. On a new graph, illustrate the market for theatre tickets in the case of these two externalities. Again, label the demand curve, the social-value curve, the supply curve, the social-cost curve, the market equilibrium level of output, the efficient level of output, and the per-unit amount of both externalities. (10 marks) e. Describe a government policy that would result in an efficient outcome

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

Macroeconomics Principles And Policy

Authors: William J. Baumol, Alan S. Blinder

11th Edition

0324586213, 978-0324586213

More Books

Students also viewed these Economics questions