Suppose there are 100 residents on the island of Mahalo. Whenever someone purchases a palm tree...

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Suppose there are 100 residents on the island of Mahalo. Whenever someone purchases a palm tree to plant on the island, everyone on the island receives the same benefits from the tree, which include beauty, shade, and erosion control. The table below shows the total social cost (which is also the total private cost) and the total private benefit received per resident depending on the quantity of palm trees purchased. Use this information to answer the questions that follow. Quantity of palm trees Total social cost (total private cost) Total private benefit per resident 0 $0 $0 1 2 3 200 400 600 800 8 12 14 15 a. Does the purchase of palm trees create a negative externality, a positive externality, or no externality? Explain. b. Draw a graph that depicts the marginal social cost and the marginal social benefit of palm trees. c. What quantity of palm trees would be purchased if they were sold in a private market? Explain. d. What is the socially optimal quantity of palm trees? Explain. e. In this situation are palm trees a private good, a public good, or a common resource? f. What could be an appropriate governmental policy response to this situation? Explain. (10 points) Suppose there are 100 residents on the island of Mahalo. Whenever someone purchases a palm tree to plant on the island, everyone on the island receives the same benefits from the tree, which include beauty, shade, and erosion control. The table below shows the total social cost (which is also the total private cost) and the total private benefit received per resident depending on the quantity of palm trees purchased. Use this information to answer the questions that follow. Quantity of palm trees Total social cost (total private cost) Total private benefit per resident 0 $0 $0 1 2 3 200 400 600 800 8 12 14 15 a. Does the purchase of palm trees create a negative externality, a positive externality, or no externality? Explain. b. Draw a graph that depicts the marginal social cost and the marginal social benefit of palm trees. c. What quantity of palm trees would be purchased if they were sold in a private market? Explain. d. What is the socially optimal quantity of palm trees? Explain. e. In this situation are palm trees a private good, a public good, or a common resource? f. What could be an appropriate governmental policy response to this situation? Explain. (10 points)

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ANSWER a Positive externality because there are extended benefits to everyone on the ... View the full answer