httpsnewconnectmheducationcomflowconnecthtm 0 Look at the ta

https//newconnect.mheducation.com/flow/connecthtm 0 Look at the tables below, which show, respectively, the willingness to pay and wilingness to accept of buyers and selers of indvidual bags of oranges. For the following questions, assume that the supply and demand. Assume that the only market participants are those listed by name in the two t equlbrium price and quantity wll depend on the indicated changes in tables Peson Price Willing E Actsal Price Person Acceptable $10 10 Carlos Chuck Brent es Instructions: Enter your answers as whole numbers a Given the equilibrium price of $10, what is the equiibrium quantity given the data above bagis) What if instead of bags of oranges, the data in the two tables dealt with a public good ike treworks displaysif all te buyers ee ride, what will be the quanitity supplied by private selers? ?.Assume that we are back to taking about bagsoforargn-prime good ba thr ry 9wennero de aid hat don \' peels impose a negative externality on the public that musit be rectified by imposing a $4 per-bag tax on selers What is the new equlierium price? What is the new eqrium quantity \" the new equilibrium quantity is the opomal quarnty, by how many bags wene oranges being

Solution

(a)

With equilibrium price being $10, maximum willingness to pay of each buyer is either greater or equal to equilibrium price. So, each buyer will demand the good. Thus, quantity demanded would be 6 units.

With equilibrium price being $10, minimum acceptable price of each seller is either lower than or equal to $10. So, each seller will supply the good. Thus, quantity supplied would be 6 units.

Hence,

The equilibrium quantity is 6 bags.

(b)

If bags of oranges are taken as public good and all buyers become free riders then each buyer will pay $0.

In such case, no private production of oranges will occur.

Hence,

The quantity supplied by the private sellers will be 0 bags.

(c)

If tax of $4 per bag is imposed then it will raise the price of a bag of orange by $4.

Hence,

The new equilibrium price is $14.

At new price of $14 per bag, only two bags will be demanded while 6 bags will be supplied.

When quantity demanded and quantity supplied are not equal, lower of the two will be quantity exchanged.

So,

The new equilibrium quantity is 2 bags.

If the new equilibrium quantity is the optimal quantity, oranges were being overproduced by (6 - 2) 4 bags.