only the third question i am confused The following charts show the marginal val

Question

only the third question i am confused

The following charts show the marginal values that two consumers place on various quantities of widgets: Answer the following questions by entering NUMBERS in the blanks. On the market demand curve, what quantity goes with the price $6? When the price is $6, how much consumer surplus does each consumer earn? Tom's CS: Jerry's CS: Now suppose the government wants to implement a sales tax of $3 per widget sales tax, which would cause the price of widgets to fall from $6 to $5. A vote is to be taken on whether to implement this tax. According to the efficiency criterion, how many votes should Tom and Jerry be allowed to cast? Tom gets to cast votes and Jerry gets to votes.

Explanation / Answer

a)

for Tom

MV = (3*P3-2*P2)/(3-2) = 3

on solving P at Q =3, P = 6

for Jerry,

on solving ,

at Q = 4, P4 = 7

so at Q=5, MV = 2

2 = (P5*5-7*4)/(5-4) = P5 = 6

so on amrket demand curve,

at Price = 6, Qty demanded = 3 for tom and 5 for jerry

so

total Qty demanded = 3+5 = 8

b)

consumer surplus for tom = area of triangle in the demand curve = .5*(10.5-6)*3 = $6.75

consumer surplus for jerry= area of triangle in the demand curve = .5*5*(11-6) = $12.5

c)

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.