Explore BrainMass
Share

Calculate the total surplus

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

1. The table below presents portions of the demand curves for three individuals for the remediation of toxic contamination in a neighborhood. The demand curves show the marginal willingness-to-pay to reduce the contaminant level by one part per million (ppm). The initial level of contamination is 5 ppm.

Level of Contamination (ppm) Marginal Willingness to Pay ($)
Leo Nan Bob
5 35 50 100
4 25 45 75
3 20 25 65
2 15 10 50
1 10 0 30
0 0 0 0

a) What is the aggregate marginal willingness to pay for this group for reductions in contamination (i.e., 5 - level of contamination)? Graph this aggregate curve
b) If the actual marginal cost of reducing contamination is constant at $75/ppm, regardless of the initial level of contamination, what is the socially efficient level of contamination in the neighborhood assuming these three people are the only ones involved?
c) Calculate the total surplus that is achieved at the socially efficient level of contamination in the neighborhood.

© BrainMass Inc. brainmass.com October 24, 2018, 10:01 pm ad1c9bdddf
https://brainmass.com/economics/finance/calculate-total-surplus-145677

Attachments

Solution Preview

Please refer to the attachment.

1. The table below presents portions of the demand curves for three individuals for the remediation of toxic contamination in a neighborhood. The demand curves show the marginal willingness-to-pay to reduce the contaminant level by one part per million (ppm). The initial level of contamination is 5 ppm.

Level of Contamination (ppm) Marginal Willingness to Pay ...

Solution Summary

The expert calculates the total surplus in this case. The total surplus that is achieved at the socially efficient level of contamination in the neighborhood is determined.

$2.19
See Also This Related BrainMass Solution

Environmental and Natural Resources Economics

Consider a manufactured good whose production process generates pollution. The annual demand for the good is given by Qd = 100 â?" P. The annual market supply is given by
Qs = P-10. In both equations, P is the price in dollars per unit. For every unit of output produced, the industry emits one unit of pollution. The marginal damage from each unit of pollution is given by Q.
a) Find the equilibrium price and quantity in a market with no government intervention.
b) At the equilibrium you computed, calculate: (i) consumer surplus; (ii) producer surplus; (iii) total dollars of pollution damage. What are the overall social benefits in the market?
c) Find the socially optimal quantity of the good. What is the socially optimal market price?
d) At the social optimum you computed, calculate:
(i) consumer surplus; (ii) producer surplus; and (iii) total dollars of pollution damage. What are the overall social benefits in the market?
e) Suppose an emissions fee is imposed on producers. What emissions fee would induce the socially optimal quantity of the good?

View Full Posting Details