TranscribedText: 1. UBC offers a rental service for bikes to students who need transportation. The monthly demand for bikes (in thousand hours] is demate =18P. UBC determines that the cost per thousand hours of bike usage is $2, and supplies any number of hours demanded by students at that price. Because cycling results in less pollution, reduces congestion, and confers health benefits, the social value function for cycling hours is (Jamie. = 24P. a) What is the market equilibrium? What is the social equilibrium? bl Why is the market equilibrium not efficient? Calculate the deadweight loss and label it in a graph. c) If UBC wanted to maximize social surplus, by how much should it subsidize the cost of one hour of cycling time? What would the total social surplus be in this case? Is there anything strange about this situation

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1. UBC offers a rental service for bikes to students who need transportation. The monthly demand for bikes (in thousand hours) is Qd,private =18-P. UBC determines that the cost per thousand hours of bike usage is $2, and supplies any number of hours demanded by students at that price. Because cycling results in less pollution, reduces congestion, and confers health benefits, the social value function for cycling hours is Qd,social = 24-P. a) What is the market equilibrium? What is the social equilibrium? b) Why is the market equilibrium not efficient? Calculate the deadweight loss and label it in a graph. c) If UBC wanted to maximize social surplus, by how much should it subsidize the cost of one hour of cycling time? What would the total social surplus be in this case? Is there anything strange about this situation? 1. UBC offers a rental service for bikes to students who need transportation. The monthly demand for bikes (in thousand hours) is Qd,private =18-P. UBC determines that the cost per thousand hours of bike usage is $2, and supplies any number of hours demanded by students at that price. Because cycling results in less pollution, reduces congestion, and confers health benefits, the social value function for cycling hours is Qd,social = 24-P. a) What is the market equilibrium? What is the social equilibrium? b) Why is the market equilibrium not efficient? Calculate the deadweight loss and label it in a graph. c) If UBC wanted to maximize social surplus, by how much should it subsidize the cost of one hour of cycling time? What would the total social surplus be in this case? Is there anything strange about this situation?