Suppose certain fireworks are legal in a residential area on the Fourth of July. The fireworks have

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Suppose certain fireworks are legal in a residential area on the Fourth of July. The fireworks have been approved for safety, but they do cause noise pollution so their use must be limited. Jenny and Salo like to purchase fireworks for their families; Table 18P-1 shows each individual's willingness-to-pay for fireworks. The price of fireworks is $2 per firework.

a. If a quota of 30 fireworks per person is imposed, what is each individual's willingness-to-pay for their last firework?

b. If the government wants no more than 60 fireworks total to be purchased, what amount of tax should be imposed? How many fireworks will Jenny and Salo purchase under this tax?


Table 18P-1:

Net marginal benefit Q Jenny a Salo 10 9. 10 20 10 30 15 6. 40 20 50 25 4. 60 30 70 35 80 40 90 45 100 50

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Microeconomics

ISBN: 978-1259813337

2nd edition

Authors: Dean S. Karlan, Jonathan J. Morduch

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