Macroeconomics 2nd Edition by Campbell McConnell ,Stanley Brue,Sean Flynn

Exercise 4

Look at Tables 5.1 and 5.2, which show, respectively, the willingness to pay and willingness to accept of buyers and seller of bags of oranges. For the following questions, assume that the equilibrium price and quantity will depend on the indicated changes in supply and demand. Assume that the only market participants are those listed by name in the two tables.
a. What is the equilibrium price and quantity for the data displayed in the two tables?
b. What if instead of bags of oranges, the data in the two tables dealt with a public good like fireworks displays. If all the buyers free ride, what will be the quantity supplied by private sellers?
c. Assume that we are back to talking about bags of oranges (a private good), but that the government has decided that tossed orange peels impose a negative externality on the public that must be rectified by imposing a $2-per-bag tax on sellers. What is the new equilibrium price and quantity? If the new equilibrium quantity is the optimal quantity, by how many bags were oranges being overproduced before?