Suppose three neighbours must vote on the installation of a traffic light that costs $210. The cost of the light will shared equally by all three. Voter A values the light at $50; voter B values the light at $50; and voter C (who drives the most) values the light at $200. If the voting rule is that the majority wins, does the light get purchased? Is it efficient to purchase the light?
Suppose the demand curve for chemical is P = 100 - Q, the private marginal cost (unregulated competitive market) is MCP = 40 + Q, and the marginal harm from gunk is MCs = Q. a) What is the socially optimum output? What specific tax results in the social optimum? b) What is the unregulated competitive equilibrium? What is the deadweight loss under perfect competition? c) What is the unregulated monopoly equilibrium? How would you optimally regulate the monopoly?