Irrational Actuarially adjusted Altruistic In private markets, which of the foll

Question

Irrational Actuarially adjusted Altruistic In private markets, which of the following are true at the optimum: The marginal rate of substitution for each individual is equal to the price ratio Market demand is determined by the vertical summing of individual demand curves Market demand is determined by the horizontal summing of individual demand curves Social welfare is maximized Both a and c In the market for a public good, which of the following are true at the optimum: The marginal rate of substitution for each individual is equal to the price ratio Market demand is determined by the vertical summing of individual demand curves Market demand is determined by the horizontal summing of individual demand curves Everyone's preferences are satisfied Both a and c Short Answer: 3 questions, each worth up to 8 points. Use complete sentences; write neatly (HA!); and carefully label any graphs you may use. Suppose that demand for a product is Q = 1,200 - 4P and supply is Q = -200 + 2P. Furthermore, suppose that the marginal external damage of this product is $8 per unit. How many more units of this product will the free market produce than is socially optimal? Calculate the deadweight loss associated with the externality.

Explanation / Answer

24 (c) market demand is determined by horizontal summation of individual demand curves

25. (b) market demand is determined by vertical summing of individual demand curves.

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