Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The supply and demand curves for pediatrician visits in a town are shown on the graph below. Researchers studying the impact of children's health on
The supply and demand curves for pediatrician visits in a town are shown on the graph below. Researchers studying the impact of children's health on society have estimated that each pediatrician visit generates an external benefit to society of $30 (per visit). a. What type of externality is this? (be Price specific about consumption/production and positiveegative.) $200 S = Private Cost = Social Cost $180 $160 $140 b. Graph the social benefit curve for $120 pediatrician visits that accounts for the $100 external benefit. We need to be precise, and I recommend plotting each endpoint $80 individually first, and then using a ruler $60 to draw a line connecting them. D = Private Benefit $40 C. Without any intervention into the $20 market, how many pediatrician visits will there be in this town? 250 300 350 400 450 500 Quantity of pediatrician visits What is the efficient (or socially optimal) quantity of pediatrician visits? d. Without intervention in this market, what is the deadweight loss that arises as a result of the externality? Shade in the area on the graph and calculate the dollar value. e. Suppose the local government wants to internalize the externality and ensure that society enjoys the full benefits of children's health. Identify one policy option that you would recommend, and be specific about the amount of the intervention
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started