Problem set in Public and Welfare Economics

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Problem set in Public and Welfare Economics

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Themes

Rawlsian Welfare, Pareto efficiency, social welfare, utility possibility curves, tax imposition, private costs, marginal rates of substitutions, welfare economics, resource allocation, economic efficiency, public goods, customer, private marginal benefit, private marginal cost

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Abstract

This assignment focuses on public economics and welfare economics.

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[...] Maximize 2 for 4 21 0 for 5 Problem 3 Q = 24 - 4P for 20 people ? P = (24 - / 4 Q = 18 - 2P for 5 people ? P = (18 - / 2 Let's sum both prices : P = (24 - + (18 - = (24 - + (36 - 2Q)/4 P = (60-3Q)/4 The marginal cost is $10 - 10 = (60 - 3Q)/4 3Q = 20 - Q = 6,67 so Q = 7 Problem 4 Private Marginal Benefit = 10 - X Private Marginal Cost = - 10 - X = 5 - X = 10 - 5 - X = 5 units Private Marginal Benefit is equivalent to Social Marginal Cost at socially efficient equilibrium = 7 10 - 7 = 3 units To address negative externalities, producers are subject to the Pigouvian tax. [...]

[...] Problem set in Public and Welfare Economics Problem 1 Uncertain : Pareto efficiency cannot be guaranteed by equal by equal marginal rates of substitutions. False : An increase in social welfare can occur without an improve in Pareto. True : A rellocation to the utility possibility curves illustrates an improve in Pareto. Problem 2 3.1) Allocation Utility , 51 , 11+50 = 61 , 21+48 = 69 , 30 + 45 = 75 38+38=76 ? Maximises social welfare 3.2) Rawlsian Allocation Utility , , 11 , 21 , 30 38 ? [...]

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