Share
Explore BrainMass

Calculate the total surplus

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.

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