QUESTION

# Look at the two tables below, which show, respectively, the willingness to pay and willingness to accept of buyers and sellers of bags of oranges.

a. Given the equilibrium price of \$10, what is the equilibrium quantity given the data above?

Instructions: Enter only whole numbers in the table below.

Equilibrium quantity =  bags

b. What if, instead of bags of oranges, the data in the two tables dealt with a public good like fireworks displays?

Instructions: Enter only whole numbers in the table below.

If all the buyers free ride, what will be the quantity supplied by private sellers? Q* =

c. Assume that we are back to talking about bags of oranges (a private good), but that the government has decided that tossed orange peels impose a negative externality on the public that must be rectified by imposing a \$2-perbag tax on sellers..

Instructions: Enter only whole numbers in the table below.

What is the new equilibrium price? P* = \$

What is the new equilibrium quantity? Q* =  bags

If the new equilibrium quantity is the optimal quantity, by how many bags were oranges being overproduced before?

Q* =  bag