AP MICROECONOMICS - Gov't Intervention

Please Help Solving this FRQ Question (a,b,c,d)

2. Homeowners purchase and plant trees for their personal benefit to improve the appearance of their yards. The market for these trees is perfectly competitive. a. Assume that the trees planted in homeowners' yards also provide constant external marginal benefits to the homeowners neighbors. Draw a correctly labeled graph of the market with the marginal social benefit (MSB), marginal private benefit (MPB), marginal social cost (MSC), and marginal private cost (MPC), and show each of the following. i. The market equilibrium quantity, labeled QM ii. The socially optimal quantity, labeled QS b. Assume the government wants homeowners to internalize the externality to achieve the socially optimal quantity of trees using a per-unit subsidy. On your graph for part (2), shade the area representing the government's total expenditure on the subsidy. c. Assume trees are normal goods. If consumers' incomes were to increase, what would happen to the socially optimal quantity of trees? Explain. d. Instead, assume that the trees do not benefit the neighbors; rather, the leaves from trees planted by homeowners fall into their neighbors' yards, costing the neighbors time and money to clean up. In the absence of government intervention, is the socially optimal quantity of these trees greater than, less than, or equal to the market equilibrium quantity? Explain