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Please solve the below images. 1. The cost of a coronavirus test, if administered by the private sector, seems to be around $50 in the
Please solve the below images.
1. The cost of a coronavirus test, if administered by the private sector, seems to be around $50 in the US. This is going to discourage a lot of people from taking the test. But every person that avoids the test can cause further infections. The contagiousness of the virus means that if you get yourself tested, you create positive externalities. Suppose that the supply curve is perfectly elastic (flat) at $50 per test. The private demand curve is q = 200 - P (where the measurement is in millions of people) But every test brings $20 of external benefit! a. If there is no government intervention, how many people will get the test done? b. Taking the external benefit into account, how many people should get tested? c. The government subsidizes the test takers at a rate of $20 per person. How many people will now get tested? d. How much consumer surplus is created through this subsidy. Compare this to the cost of the subsidy. Is the subsidy a good idea? Marginal Total spinners product of Total Fixed Total Total Number of workers produced worker wages cost Cost Revenue |Profit 0 0 0 $500 100 $500 250 $500 3 500 $500 4 800 $500 5 1000 $500 1100 $500 1150 $500 1170 $500 9 1160 $500 Note that total cost is fixed cost plus wages, total revenue is price times quantity, and profit is total revenue minus total costStep by Step Solution
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