Question
Suppose concert venues in a city face a demand curve for concerts given by P = 30, 00040Q where Q is number of concerts in
Suppose concert venues in a city face a demand curve for concerts given by P = 30, 00040Q where Q is number of concerts in a year and P is the revenue earned from one concert. Staging a concert imposes a private cost of $20,000 on a particular venue, but staging concerts also imposes a total cost in terms of noise pollution on the neighborhood of the venue given by $1000+50Q+.02Q2. What is the total social cost function of concerts put on by this venue and what does this function tell us about the value (positive and negative) of concerts? Assuming the venue acts like a competitor in the concert market, what is the market equilibrium number of concerts? What is the socially optimal number of concerts? Why is the socially optimal number of concerts not zero?
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