The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment: Quantity First bottle Second bottle Third bottle Fourth bottle Fifth bottle Further bottles Willingness to Pay (Dollars) 10 8 6 4 Each Whovillian will The cost of producing a bottle of Zlurp is $3.50, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) 2 0 bottles rec Producing Zlurp creates pollution. Each bottle has an external cost of $1. consumer surplus of Taking this additional cost into account, total surplus per person in the allocation you previously determined decreases to $ Consumption per person is now Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by 1 bottle. Cindy's consumer surplus (ignoring the cost of pollution she experiences) is now $ by $ Mayor Grinch imposes a $1 tax on each bottle of Zlurp. Her decision bottles. This yields a per-person consumer surplus of $ increases decreases total surplus in Whoville not including the cost of pollution, a per-
The many identical residents of Whoville love drinking Zlurp. Each resident has the following willingness to pay for the tasty refreshment: Quantity First bottle Second bottle Third bottle Fourth bottle Fifth bottle Further bottles Willingness to Pay (Dollars) 10 8 6 4 Each Whovillian will The cost of producing a bottle of Zlurp is $3.50, and the competitive suppliers sell it at this price. (The supply curve is horizontal.) 2 0 bottles rec Producing Zlurp creates pollution. Each bottle has an external cost of $1. consumer surplus of Taking this additional cost into account, total surplus per person in the allocation you previously determined decreases to $ Consumption per person is now Cindy Lou Who, one of the residents of Whoville, decides on her own to reduce her consumption of Zlurp by 1 bottle. Cindy's consumer surplus (ignoring the cost of pollution she experiences) is now $ by $ Mayor Grinch imposes a $1 tax on each bottle of Zlurp. Her decision bottles. This yields a per-person consumer surplus of $ increases decreases total surplus in Whoville not including the cost of pollution, a per-
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.13P
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