Answer to Question #110743 in Economics for jonathan

Question

Use the following information to answer the next eight questions:

Consider the market for post-secondary education. The demand curve in the market is given by Q=100-P and the supply curve is given by Q=P/4, where Q is the number of students. Education creates a positive externality such that marginal external benefit increases with the number of students according to the function MEB=Q. Now suppose government provides an ad valorem (%) Pigouvian subsidy to producers in this market.
30. The ad valorem subsidy rate is ___________%.
31. Gain in consumer surplus (∆CS) is $ ____________.
32. Gain in producer surplus (∆PS) is $ _____________.
33. Increase in third part (external) effects (∆EE) is $ ______________.
34. Government subsidy payments (∆GB) total $ ________________.
35. The increase in total benefits (∆TB) are $ _________________.
36. The increase in total costs (∆TC) are $ ________________.
37. The gain in net social welfare (∆NSW) is $________________.

Answer 1

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