1) Listen to the Freakonomics Radio Podcast - Parking is Hell (use the link: http://freakonomics.com/podcast-tag/public-good/)
(a) Some say parking is overly subsidized. Why?
(b) Several cities have considered implemented real-time parking pricing. The SFPark is an ongoing experiment in San Francisco.
a. Browse the webpage, and summarize the main features of this program, and its goes. How does the San Francisco experiment potentially addresses issues of parking?
b. If the problem is 'crusing' for parking, if the regulator cannot implement a parking policy, do you think that a higher gasoline tax would help solve this problem? What is the fundamental difference between a higher gasoline tax and a parking policy? Which one is superior and why?
2) The government can increase its effectiveness of mosquito control by increasing the number of gallons of mosquito spray it applies. Suppose for simplicity that there are only two people in society, Adam and Beth. The demand for mosquito control by Adam is given by:
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QA:
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200
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150
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100
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50
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0
|
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P:
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0
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50
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100
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150
|
200
|
Beth's demand curve is given by:
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QB:
|
200
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150
|
100
|
50
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0
|
|
P:
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0
|
100
|
200
|
300
|
400
|
Suppose the mosquito control is a pure public good; that is, once it is produced everyone benefits from it.
a. What would be the optimal level of mosquito control if it could be produced with a constant marginal cost of $100 per unit and there are no fixed costs?
b. If mosquito control were left to the private market, can we tell how much would be produced? Why or why not?
c. If the government were to produce the optimal level of mosquito control, how much would it cost?
d. The government decides to go ahead and produce the optimal level of mosquito control, and then has to determine how to cover the cost. Suppose it decides to tax each person, Adam and Beth, in proportion to the benefits received. What will be the tax paid by each person?
e. The above question assumes that the government knows each person's demand for mosquito control. This is not very realistic. Discuss briefly the difficulties the government would face in acquiring this information if citizens knew that the tax bill was to be allocated in proportion to each person's estimated benefits received.
3. According to one excellent study, the external costs imposed by alcohol consumption in Canada are equivalent to about 50 cents per ounce of alcoholic beverage consumed. (These costs stem from dangerous driving and from additional health care costs, borne by Canadian taxpayers.) Canada currently imposes a tax on alcoholic beverages of 70 cents per ounce. Alcoholic beverage sellers are competitive and would produce at a constant marginal cost of $1 per ounce if there were no tax on alcoholic beverages.
a. Draw the private marginal benefit, the social marginal benefit, the demand, the private marginal cost, the social marginal cost, and the supply curves consistent with the above information.
b. Under the current tax of 70 cents per ounce, is there too much or too little alcohol consumed in Canada? Explain what "too much" and "too little" mean in your answer.
c. If you sought to maximize social surplus in the market for alcoholic beverages, what tax, if any would you recommend? Relative to having no tax, who would benefit and would be harmed if your recommendation were adopted?
Attachment:- Assignment.rar