Question 5 a,b,c,d,e

Econ 221 PS6 5) Quotas (5 points) Spring 2023 suppose certain fireworks are legal in a residential area on the Fourth of July, but they cause noise pollution. There are two consumers in the neighborhood, Tom and Jerry, whose willingness to pay (in $) is shown in the table to the right. P ($) Q (Tom) Q (Jerry) To clarify the table: at a price of $7, Tom will demand 30 10 0 0 fireworks and Jerry will demand 15 fireworks. 9 10 5 20 10 a. What type of externality is present in the market for 30 15 fireworks? (be specific) 6 40 20 5 50 25 4 60 30 70 35 N W . At a price of $2 per firework, how many fireworks will 80 40 be purchased? 90 45 c. If a quota of 30 fireworks per person is imposed, how much is Tom willing to pay for his last firework? How much is Jerry willing to pay? [Hint: find the price at which their Qd is 30] Is this outcome efficient? Why or why not? d. Suppose that instead of a per-person quota, the government places a quota of 60 on all fireworks purchased. In the most efficient outcome, how many fireworks will Tom and Jerry each purchase, and what will be the price of a firework? [Hint: at what price level will 60 total fireworks be sold, and how many will each buy at that price?] e. Bonus: Now suppose the government likes the total quota of 60 fireworks, but decides to instead use a tax. If the price remains $2 per firework, and the tax falls entirely on consumers of the good, what should be the per-unit amount of the tax