Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Please solve the below images (chart is the most important one). 1. The cost of a coronavirus test, if administered by the private sector, seems

Please solve the below images (chart is the most important one).

image text in transcribedimage text in transcribed
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 Totalspinners product of Total Total Number of workers produced worker Cost Revenue Profit Note that total cost is fixed cost plus wages, total revenue is price times quantity, and profit is total revenue minus total cost

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Economics

Authors: Gregory Mankiw, Mark P. Taylor

5th Edition

1473768543, 978-1473768543

Students also viewed these Economics questions

Question

Gambling by student and professional athletes

Answered: 1 week ago