1. Citizens of Veridiania love eating and looking the flowers that grow in the town center....

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1. Citizens of Veridiania love eating and looking the flowers that grow in the town center. The workers in Veridiania can spend their time planting and tending flowers to enjoy or growing food for consumption. A worker in Veridiana can grow 2 bushels of food in a day or tend 100 flowers. The 15 residents of the city are each willing to forgo the consumption of 1 bushel of food for the enjoyment of 500 extra flowers. a. What are the private and public goods in this example? b. What is the MRS-MUfood/MUflowers? (How many flowers are they willing to give up to get one more bushel of food?) What is the MRT MCfood/MCflowers (What is the cost of one bushel of food in terms of flowers given up? c. Is this allocation Pareto efficient? Should workers spend more or less time planting flowers? Why? d. If this allocation is not P.E., is government intervention necessary? Why or why not? 2. It has been estimated that privately run buses, trains, and subways are about 10 percent cheaper, on a per rider basis, than the same transportation if government run. Is public transportation a public good? On this basis, would you recommend that public transportation be privatized? What additional information would you want to make this decision? 3. Suppose there are only two fishermen, Maria and Ruby, who fish along a certain coast. They would each benefit if lighthouses were built along the coast where they fish. The marginal cost of building each additional lighthouse is $100. Maria's demand curve for lighthouses is given by P=170-2Q, and Ruby's by P=150-Q, where Q is the number of lighthouses. a. Explain why we might not expect to find the efficient number of lighthouses along this coast. b. Draw the demand curve for Maria and Ruby individually and the market demand for lighthouses. c. What is the efficient number of lighthouses? 1. Citizens of Veridiania love eating and looking the flowers that grow in the town center. The workers in Veridiania can spend their time planting and tending flowers to enjoy or growing food for consumption. A worker in Veridiana can grow 2 bushels of food in a day or tend 100 flowers. The 15 residents of the city are each willing to forgo the consumption of 1 bushel of food for the enjoyment of 500 extra flowers. a. What are the private and public goods in this example? b. What is the MRS-MUfood/MUflowers? (How many flowers are they willing to give up to get one more bushel of food?) What is the MRT MCfood/MCflowers (What is the cost of one bushel of food in terms of flowers given up? c. Is this allocation Pareto efficient? Should workers spend more or less time planting flowers? Why? d. If this allocation is not P.E., is government intervention necessary? Why or why not? 2. It has been estimated that privately run buses, trains, and subways are about 10 percent cheaper, on a per rider basis, than the same transportation if government run. Is public transportation a public good? On this basis, would you recommend that public transportation be privatized? What additional information would you want to make this decision? 3. Suppose there are only two fishermen, Maria and Ruby, who fish along a certain coast. They would each benefit if lighthouses were built along the coast where they fish. The marginal cost of building each additional lighthouse is $100. Maria's demand curve for lighthouses is given by P=170-2Q, and Ruby's by P=150-Q, where Q is the number of lighthouses. a. Explain why we might not expect to find the efficient number of lighthouses along this coast. b. Draw the demand curve for Maria and Ruby individually and the market demand for lighthouses. c. What is the efficient number of lighthouses?