microeconomics for public decisions anne c. steinemann
Post on 21-Dec-2015
222 views
TRANSCRIPT
![Page 1: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/1.jpg)
Microeconomics for Public DecisionsAnne C. Steinemann
![Page 2: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/2.jpg)
The Economy as a System
• Figure 1-1
![Page 3: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/3.jpg)
The Economic System Within the
Ecosystem
• Figure 1-2
![Page 4: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/4.jpg)
The Demand Curve
• Figure 2-1
![Page 5: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/5.jpg)
Increase in Demand
• Figure 2-2
![Page 6: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/6.jpg)
Decrease in Demand
• Figure 2-3
![Page 7: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/7.jpg)
Decrease in Quantity Demanded
• Figure 2-4
![Page 8: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/8.jpg)
Increase in Quantity Demanded
• Figure 2-5
![Page 9: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/9.jpg)
The Supply Curve
• Figure 2-6
![Page 10: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/10.jpg)
Increase in Supply
• Figure 2-7
![Page 11: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/11.jpg)
Decrease in Supply
• Figure 2-8
![Page 12: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/12.jpg)
Increase in Quantity Supplied
• Figure 2-9
![Page 13: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/13.jpg)
Decrease in Quantity Supplied
• Figure 2-10
![Page 14: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/14.jpg)
Price Elasticity of Demand
• Page 29 ED =Qf −Qi( ) /Qi
Pf −Pi( ) / Pi
![Page 15: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/15.jpg)
Price Elasticity of Demand
• Figure 2-11
![Page 16: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/16.jpg)
Estimates of the Price Elasticity of
DemandGoodGood Price Elasticity of Price Elasticity of
DemandDemandHousing -0.01
Residential electricity -0.13
Bread -0.15
Bus travel -0.20
Coffee -0.25
Sugar -0.30
Medical insurance -0.31
Legal services -0.37
![Page 17: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/17.jpg)
Elastic Demand
• Figure 2-11a
![Page 18: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/18.jpg)
Inelastic Demand
• Figure 2-11b
![Page 19: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/19.jpg)
Unitary Elastic Demand
• Figure 2-11c
![Page 20: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/20.jpg)
Elasticities Vary Along a Straight
Line
• Figure 2-12
![Page 21: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/21.jpg)
Relationship Between Price Elasticities of Demand, Price, Quantity and Total Revenue
EEDD PricePrice QuantityQuantity Total Total RevenueRevenue
inelastic increase decrease increase
inelastic decrease increase decrease
elastic increase decrease decrease
elastic decrease increase increase
unitary increase decrease no change
unitary decrease increase no change
![Page 22: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/22.jpg)
Price Elasticity of Supply
• Page 42 ES =Qf −Qi( ) /Qi
Pf −Pi( ) / Pi
![Page 23: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/23.jpg)
Derivation of the Market Demand Curve from Individual Demand Curves
PricePrice Consumer Consumer AA
Consumer Consumer BB
Total Quantity Total Quantity DemandedDemanded
P QA QB QT = QA + QB
$8 0.0 0.0 0.0
$7 2.5 0.0 2.5
$6 5.0 0.0 5.0
$5 7.5 0.0 7.5
$4 10.0 2.0 12.0
$3 12.5 4.0 16.5
$2 15.0 6.0 21.0
$1 17.5 8.0 25.5
$0 20.0 10.0 30.0
![Page 24: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/24.jpg)
Derivation of a Market Demand
Curve
• Figure 3-1
![Page 25: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/25.jpg)
Effect of an Increase in Individual Demand on
Market Demand
• Figure 3-2
![Page 26: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/26.jpg)
Derivation of the Market Supply Curve from Individual
Supply Curves
PricePrice Producer Producer AA
Producer Producer BB
Total Quantity Total Quantity Supplied Supplied
DemandedDemandedP QA QB QT = QA + QB
$8 8 4 12
$7 7 3.5 10.5
$6 6 3 9
$5 5 2.5 7.5
$4 4 2 6
$3 3 1.5 4.5
$2 2 1 3
$1 1 0.5 1.5
$0 0 0 0
![Page 27: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/27.jpg)
Derivation of a Market Supply
Curve
• Figure 3-3
![Page 28: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/28.jpg)
Market Demand and Market Supply
Together
• Figure 3-4
![Page 29: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/29.jpg)
Market Equilibrium
• Figure 3-5
![Page 30: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/30.jpg)
Shortage: Quantity Demanded Greater Than
Quantity Supplied
• Figure 3-6
![Page 31: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/31.jpg)
Surplus: Quantity Supplied Greater Than Quantity
Demanded
• Figure 3-7
![Page 32: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/32.jpg)
Change in Equilibrium Due to a
Supply Decrease
• Figure 3-8
![Page 33: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/33.jpg)
Change in Equilibrium
Due to a Demand Increase
• Figure 3-9
![Page 34: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/34.jpg)
Demand for Conventionally Grown
Produce
• Figure 3-10
![Page 35: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/35.jpg)
Decrease in Demand for Conventionally Grown
Produce
• Figure 3-11
![Page 36: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/36.jpg)
Decrease in Supply for Conventionally Grown
Produce
• Figure 3-12
![Page 37: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/37.jpg)
Increase in Demand for Organically Grown
Produce
• Figure 3-13
![Page 38: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/38.jpg)
Increase in Supply for Organically Grown
Produce
• Figure 3-14
![Page 39: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/39.jpg)
Effects of Change in Supply and Demand on Equilibrium Price and
Quantity
SupplySupply DemandDemand EquilibriuEquilibrium Pricem Price
EquilibriuEquilibrium m
QuantityQuantityincrease no change decrease increase
decrease no change increase decrease
no change increase increase increase
no change decrease decrease decrease
increase increase indeterminate increase
decrease increase increase indeterminate
increase decrease decrease indeterminate
decrease decrease indeterminate decrease
![Page 40: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/40.jpg)
Before a Tax
• Figure 3-15
![Page 41: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/41.jpg)
After a $2 Tax on Producers
• Figure 3-16
![Page 42: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/42.jpg)
After a $2 Tax on Consumers
• Figure 3-17
![Page 43: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/43.jpg)
Before a Subsidy
• Figure 3-18
![Page 44: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/44.jpg)
After a $2 Subsidy to Producers
• Figure 3-19
![Page 45: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/45.jpg)
After a $2 Subsidy to Consumers
• Figure 3-20
![Page 46: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/46.jpg)
Price Floor
• Figure 3-21
![Page 47: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/47.jpg)
Price Ceiling
• Figure 3-22
![Page 48: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/48.jpg)
Output Quota
• Figure 3-23
![Page 49: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/49.jpg)
Rent Control
• Figure 3-24
![Page 50: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/50.jpg)
Agricultural Price Supports
• Figure 3-25
![Page 51: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/51.jpg)
Supply and Demand with a Price Cap on
Electricity
• Figure 3-26
![Page 52: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/52.jpg)
Consumer Surplus (A)
• Figure 4-1
![Page 53: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/53.jpg)
Willingness to Pay for Park Visits
• Figure 4-2
![Page 54: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/54.jpg)
Demand Curve for Park Visits
• Figure 4-3
![Page 55: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/55.jpg)
Effect of a Price Change
• Figure 4-4
![Page 56: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/56.jpg)
Comparison of Consumer
Surplus
• Figure 4-5
![Page 57: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/57.jpg)
Indifference Curves for an Individual
Consumer
• Figure 4-6
![Page 58: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/58.jpg)
Substitution and Income Effects for a
Normal Good
• Figure 4-7
![Page 59: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/59.jpg)
Substitution and Income Effects for an
Inferior Good
• Figure 4-8
![Page 60: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/60.jpg)
Budget Line for Budget Constrain of
$80
• Figure 4-9
![Page 61: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/61.jpg)
Point of Maximum Utility
• Figure 4-10
![Page 62: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/62.jpg)
Income Expansion Path
• Figure 4-11
![Page 63: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/63.jpg)
Derivation of Demand Curve
• Figure 4-12
![Page 64: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/64.jpg)
Income Grantfor Infrastructure
• Figure 4-13
![Page 65: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/65.jpg)
Subsidy for Infrastructure
• Figure 4-14
![Page 66: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/66.jpg)
Tied Grant for Infrastructure
• Figure 4-15
![Page 67: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/67.jpg)
Weekday CTA Rapid Rail Passenger Average Before and During Dime Time
Program
Income Income ClassClass
Before Dime Before Dime Time (Fare = Time (Fare =
$0.25)$0.25)
During Dime During Dime Time (Fare = Time (Fare =
$0.10)$0.10)Low 9,500 15,020
Moderate
8,250 10,860
High 5,100 6,410
Total 22,850 32,290
![Page 68: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/68.jpg)
Dime Time Weekday CTA Rapid Rail Passenger
Averages by Prior Mode of Travel
Prior Mode of Prior Mode of TravelTravel LowLow ModeratModerat
eeHighHigh TotalTotal
Dime Time 9,500 8,250 5,100 22,850
Non-Dime Time 625 380 310 1,315
Bus and Trolley 1,080 680 340 2,100
Auto Driver 895 525 400 1,820
Auto Passenger 220 75 80 375
Walk 850 380 90 1,320
Trip Not Made 1,850 570 90 2,510
Total 15,020 10,860 6,410 32,290
![Page 69: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/69.jpg)
Aggregate Demandfor Income Group
• Figure 4-16
![Page 70: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/70.jpg)
Total Changein Consumer
Surplus
• Figure 4-17
![Page 71: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/71.jpg)
Changes in Consumer Surplus for Previous and New Riders
(dollars per day)
Income Income ClassClass
PreviouPrevious Riderss Riders
New New RidersRiders
Change in Change in Consumer Consumer
SurplusSurplus
Low$1,425.
00$414.00 $1,839.00
Moderate
1,237.50
$195.75 1,433.25
High 765.00 $98.25 863.25
Total$3,427.
50$708.00 $4,135.50
![Page 72: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/72.jpg)
Hypothetical Indifference Curves
for an Individual
• Figure A4-1
![Page 73: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/73.jpg)
Costs and Revenues for Meals-on-WheelsNumber Number of Meals of Meals per Dayper Day
TotalTotalRevenuRevenu
ee
VariablVariable Coste Cost
Total Total CostCost
Average Average Total Total CostCost
MarginaMarginal Costl Cost ProfitProfit
0 0 15.00 -15.00
3 18.00 7.50 22.50 7.50 2.00 -4.50
6 36.00 16.50 31.50 5.25 3.50 4.50
9 54.00 30.00 45.00 5.00 5.00 9.00
12 72.00 48.00 63.00 5.25 6.50 9.00
![Page 74: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/74.jpg)
Cost Curvesfor Meals-on-Wheels
• Figure 5-1
![Page 75: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/75.jpg)
Marginal Revenue > Average Variable
Cost
• Figure 5-2
![Page 76: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/76.jpg)
Marginal Revenue < Average Variable
Cost
• Figure 5-3
![Page 77: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/77.jpg)
Breakeven Pointand Shutdown Point
• Figure 5-4
![Page 78: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/78.jpg)
Short-Run Production
• Figure 5-5
![Page 79: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/79.jpg)
Derivation ofthe Supply Curve
• Figure 5-6
![Page 80: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/80.jpg)
Long-Run Average Total Cost
• Figure 5-7
![Page 81: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/81.jpg)
Long-Run Average Total Cost and Economies of
Scale
• Figure 5-8
![Page 82: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/82.jpg)
Long-Run Supply Curve for a
Competitive Firm
• Figure 5-9
![Page 83: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/83.jpg)
Producer Surplus
• Figure 5-10
![Page 84: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/84.jpg)
Decrease in Producer Surplus Due to a Decrease in Price
• Figure 5-11
![Page 85: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/85.jpg)
Vacant Lot Clearance Program
BudgetBudgetPart-Time Young Employees
Wage$60,00
0Fringes 6,000
Supervisory Personnel Quarter Time 5,000Two Full Time 18,000
MaterialsTrash bags, rakes
5,000
Truck rental 6,000
Total$100,0
00
![Page 86: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/86.jpg)
Tons of Trash Collected per Day
as a Function of Daily Use of Trucks and Labor-hours
Trucks per DayTrucks per Day
Labor-Hours per Labor-Hours per DayDay 55 1010 1515 2020
50 20 40 50 60200 65 90 116 128350 93 120 147 161500 107 134 165 187650 110 140 177 205800 110 140 183 217
![Page 87: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/87.jpg)
Tons of Trash Collected per Day by Cambridge
Sanitation Dept.
• Figure A5-1
![Page 88: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/88.jpg)
Isoquant for Output of 100 Tons per Day
• Figure A5-2
![Page 89: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/89.jpg)
Isoquants for Various Daily Output
Levels
• Figure A5-3
![Page 90: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/90.jpg)
Isoquant for Q = 60
• Figure A5-4
![Page 91: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/91.jpg)
Alternate Isoquants for Various Output
Levels
• Figure A5-5
![Page 92: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/92.jpg)
Tons of Trash Collected per Day by Cambridge
Sanitation Dept.
• Figure A5-6
![Page 93: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/93.jpg)
Marginal Product Curve (Q = 5K) of Production for
Fixed Amount
• Figure A5-7
![Page 94: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/94.jpg)
Social Surplus Under Competitive Equilibrium
Conditions
• Figure 7-1
![Page 95: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/95.jpg)
Changes in Social Surplus Due to Deviations from the
Competition
• Figure 7-2
![Page 96: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/96.jpg)
Changes in Social Surplus Due to a
Price Floor
• Figure 7-3
![Page 97: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/97.jpg)
Changes in Total Social Surplus Due to a Price
FloorChanges in Surplus from a Changes in Surplus from a
Price FloorPrice Floor Before Price FloorBefore Price Floor After Price After Price FloorFloor ChangeChange
Consumer surplus I+II+III I -II-III
Producer surplus IV+V II+IV II-V
Social surplus I+II+III+IV+V I+II+IV -III-V
Distribution of Benefits and Distribution of Benefits and Costs of a Price FloorCosts of a Price Floor BenefitsBenefits CostsCosts NetNet
Consumers -II-III -II-III
Producers II -V II-V
Society II -II-III-V -III-V
![Page 98: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/98.jpg)
Changes in Social Surplus Due to a
Price Ceiling
• Figure 7-4
![Page 99: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/99.jpg)
Changes in Total Social Surplus Due to a Price
CeilingChanges in Surplus from a Changes in Surplus from a
Price CeilingPrice CeilingBefore Price Before Price
FloorFloorAfter Price After Price
FloorFloor ChangeChange
Consumer surplus I+II I+III III-II
Producer surplus III+IV+V V -III-IV
Social surplus I+II+III+IV+V I+III+V -II-IV
Distribution of Benefits Distribution of Benefits and Costs of a Price and Costs of a Price
CeilingCeilingBenefitsBenefits CostsCosts NetNet
Consumers III -II III-II
Producers -III-IV -III-IV
Society III -II-III-IV -II-IV
![Page 100: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/100.jpg)
Changes in Social Surplus Due to an
Output Quota
• Figure 7-5
![Page 101: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/101.jpg)
Changes in Total Social Surplus Due to a Output
QuotaChanges in Surplus from Changes in Surplus from
an Output Quotaan Output QuotaBefore Price Before Price
FloorFloorAfter Price After Price
FloorFloor ChangeChange
Consumer surplus I+II+III I -II-III
Producer surplus IV+V+VI II+IV+VI II-V
Social surplus I+II+III+IV+V+VI I+II+IV+VI -III-V
Distribution of Benefits Distribution of Benefits and Costs of an Output and Costs of an Output
QuotaQuotaBenefitsBenefits CostsCosts NetNet
Consumers -II-III -II-III
Producers II -V II-V
Society II -II-III-V -III-V
![Page 102: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/102.jpg)
Changes in Social Surplus Due to a Tax
• Figure 7-6
![Page 103: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/103.jpg)
Changes in Total Social Surplus Due
to a TaxChanges in Surplus from a Changes in Surplus from a TaxTax
Before Price Before Price FloorFloor
After Price After Price FloorFloor ChangeChange
Consumer surplus I+II+III I -II-III
Producer surplus IV+V+VI VI -IV-V
Government II+IV II+IV
Social surplus I+II+III+IV+V+VI I+II+IV+VI -III-V
Distribution of Benefits Distribution of Benefits and Costs from a Taxand Costs from a Tax BenefitsBenefits CostsCosts NetNet
Consumers -II-III -II-III
Producers -IV-V -IV-V
Government II+IV II+IV
Society II+IV -II-III-IV-V -III-V
![Page 104: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/104.jpg)
Changes in Social Surplus Due to a
Subsidy
• Figure 7-7
![Page 105: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/105.jpg)
Changes in Total Social Surplus Due
to a SubsidyChanges in Changes in Surplus from a Surplus from a
SubsidySubsidy
Before Before Price FloorPrice Floor After Price FloorAfter Price Floor ChangeChange
Consumer surplus I+II I+II+VI+VII+VIII VI+VII+VIII
Producer surplus VI+X II+III+IV+VI+X II+III+IV
Government-II-III-IV-V-VI-VII-VIII-
IX-II-III-IV-V-VI-VII-VIII-
IX
Social surplus I+II+VI+X I+II+VI+X-V-IX -V-IX
Distribution of Distribution of Benefits and Costs Benefits and Costs
from a Subsidyfrom a SubsidyBenefitsBenefits CostsCosts NetNet
Consumers VI+VII+VIII VI+VII+VIII
Producers II+III+IV II+III+IV
Government-II-III-IV-V-VI-VII-
VIII-IX-II-III-IV-V
-VI-VII-VIII-IX
SocietyII+IIII+IV+VI+VII
+VIII-II-III-IV-V-VI-VII-
VIII-IX-V-IX
![Page 106: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/106.jpg)
Effect of a Tariff on Social Surplus
• Figure Q7-1
![Page 107: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/107.jpg)
Competitive and Monopolistic Markets:
Supply
• Figure 8-1
![Page 108: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/108.jpg)
Competitive and Monopolistic Markets:
Demand
• Figure 8-2
![Page 109: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/109.jpg)
Revenue for a Monopolist
Average Average Revenue Revenue (price)(price)
OutputOutputTotal Total
RevenuRevenuee
MarginaMarginal l
RevenuRevenuee
$10 1 $10 $10
9 2 18 8
8 3 24 6
7 4 28 4
6 5 30 2
5 6 30 0
4 7 28 -2
3 8 24 -4
2 9 18 -6
1 10 10 -8
![Page 110: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/110.jpg)
Marginal Revenue and Average Revenue for a
Monopoly
• Figure 8-3
![Page 111: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/111.jpg)
Monopoly Price and Output
Determination
• Figure 8-4
![Page 112: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/112.jpg)
Monopoly Profits
• Figure 8-5
![Page 113: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/113.jpg)
Monopoly Price Regulation
• Figure 8-6
![Page 114: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/114.jpg)
Comparison of Marginal Cost Under Perfect Competition
and Monopoly
• Figure 8-7
![Page 115: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/115.jpg)
Negative Externalities: Social Costs Greater Than Private Production Costs
• Figure 9-1
![Page 116: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/116.jpg)
Negative Externalities: Social Costs Greater Than Private Consumption Costs
• Figure 9-2
![Page 117: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/117.jpg)
Negative Externalities: Social Costs Greater Than Private Production Benefits
• Figure 9-3
![Page 118: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/118.jpg)
Negative Externalities: Social Costs Greater Than
Private Consumption Benefits
• Figure 9-4
![Page 119: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/119.jpg)
Bargain Between Two Parties
• Figure 9-5
![Page 120: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/120.jpg)
The Efficient Solution: Marginal Benefits Equal
Marginal Costs of Positive Externality
• Figure 9-6
![Page 121: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/121.jpg)
The Efficient Solution: Marginal Benefits Equal
Marginal Costs of Negative Externality
• Figure 9-7
![Page 122: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/122.jpg)
Results of CV Experiment for the Indianapolis
Crooked Creek Greenway
Property Property OwnersOwners
RenterRenterss
County County ResidentResident
ss
Respondents - Survey 47% 8% 26%
Respondents - Solicitation 39% 7% 17%
Prior CCG Awareness 18% 11% 9%
Willing to Contribute Survey 51% 35% 22%
Willing to Contribute Solicitation
36% 14% 11%
Mean WTP — Survey $47.20 $10.71 $29.07
Mean WTP — Solicitation $32.24 $13.33 $34.50
![Page 123: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/123.jpg)
Monthly Cost of Pollution ReductionQuantity Quantity Removed Removed
(tons)(tons)
Knotty PineKnotty Pine Wall BoardWall Board
Total CostTotal Cost Marginal Marginal CostCost Total CostTotal Cost Marginal Marginal
CostCost
1 $200 $200 $500 $500
2 600 400 1,000 500
3 1,200 600 3,500 2,500
4 2,000 800 7,000 3,500
5 3,000 1,000 12,000 5,000
6 5,000 2,000 20,000 8,000
7 8,000 3,000
8 12,000 4,000
9 20,000 8,000
10 36,000 16,000
![Page 124: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/124.jpg)
Marginal Costs of Pollution ReductionReduction Reduction
(tons/month)(tons/month) Knotty PineKnotty Pine Wall BoardWall Board TotalTotal
1 $200 $500 $200 (KP)
2 400 500 400 (KP)
3 600 2,500 500 (WB)
4 800 3,500 500 (WB)
5 1,000 5,000 600 (KP)
6 2,000 8,000 800 (KP)
7 3,000 1,000 (KP)
8 4,000 2,000 (KP)
10 16,000 3,000 (KP)
15 8,000 (WB)
![Page 125: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/125.jpg)
Tax to Correct for Negative Externality
• Figure 9-8
![Page 126: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/126.jpg)
Subsidy to Correct for Positive Externality
• Figure 9-9
![Page 127: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/127.jpg)
Marketable Pollution Permits
• Figure 9-10
![Page 128: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/128.jpg)
Classification of Goods
• Figure 10-1
![Page 129: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/129.jpg)
Demand for Two ConsumersPricePrice Consumer AConsumer A Consumer BConsumer B
$10 0 0
9 1 2
8 2 4
7 3 6
6 4 8
5 5 10
4 6 12
3 7 14
2 8 16
1 9 18
0 10 20
![Page 130: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/130.jpg)
Consumer Demand
• Figure 10-2
![Page 131: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/131.jpg)
Market Demand: Private Production
PricPricee
Consumer Consumer AA
Consumer Consumer BB
Market Market DemandDemand
$10 0 0 0
9 1 2 3
8 2 4 6
7 3 6 9
6 4 8 12
5 5 10 15
4 6 12 18
3 7 14 21
2 8 16 24
1 9 18 27
0 10 20 30
![Page 132: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/132.jpg)
Determining Market Demand: Private
Production
• Figure 10-3
![Page 133: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/133.jpg)
Aggregate Demand:Public Production
QuantiQuantityty
Consumer Consumer AA
Consumer Consumer BB
Total Social Total Social BenefitsBenefits
1 $9.00 $9.50 $18.50
3 7.00 8.50 15.50
5 5.00 7.50 12.50
7 3.00 6.50 9.50
9 1.00 5.50 6.50
10 0.00 5.00 5.00
12 4.00 4.00
14 3.00 3.00
16 2.00 2.00
18 1.00 1.00
20 0 0
![Page 134: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/134.jpg)
Determining Aggregate Demand: Private
Production
• Figure 10-4
![Page 135: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/135.jpg)
Combining Demand Curves for a Private
Good
• Figure 10-5
![Page 136: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/136.jpg)
Combining Demand Curves for a Public
Good
• Figure 10-6
![Page 137: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/137.jpg)
Majority Voting InefficienciesInefficient No Inefficient No VoteVote JohnJohn ClaireClaire CatherinCatherin
eeSumSum
Benefits $650 $350 $300$1,30
0
Costs 400 400 400 1,200
Vote yes no no noInefficient Yes Inefficient Yes VoteVote JohnJohn ClaireClaire CatherinCatherin
eeSumSum
Benefits $450 $450 $0 $900
Costs 400 400 400 1,200
Vote yes yes no yes
![Page 138: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/138.jpg)
Voting ParadoxJohnJohn ClaireClaire CatherineCatherine
Path 1st choice 3rd choice 2nd choice
Park 2nd choice 1st choice 3rd choice
Pool 3rd choice 2nd choice 1st choice
Majority Voting Majority Voting OutcomesOutcomes
Path vs. Park Path winsPark vs. Pool Park winsPath vs. Pool Pool wins
![Page 139: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/139.jpg)
Demand for a Public Good with a Marginal
Cost of Zero
• Figure 10-7
![Page 140: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/140.jpg)
Demand and Costs for a Utility Company
• Figure 10-8
![Page 141: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/141.jpg)
Demand and Costs for Two Publicly Provides Goods
with Different Demand Curves
• Figure 10-9
![Page 142: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/142.jpg)
Pricing Options for a Publicly Provided
Good
• Figure 10-10
![Page 143: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/143.jpg)
Demand and Costs for a Public Facility with Variable Demand
• Figure 10-11
![Page 144: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/144.jpg)
Market for Low-Quality Cars
• Figure 11-1
![Page 145: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/145.jpg)
Market for High-Quality Cars
• Figure 11-2
![Page 146: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/146.jpg)
Utility of Income
• Figure 11-3
![Page 147: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/147.jpg)
Utility Function for Risk-Averse Individuals
• Figure 11-4
![Page 148: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/148.jpg)
Utility Function for Risk-Prone Individuals
• Figure 11-5
![Page 149: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/149.jpg)
Utility Function for Risk-Neutral Individuals
• Figure 11-6
![Page 150: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/150.jpg)
Decision Tree for Calculating Expected
GPA
• Figure 11-7
![Page 151: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/151.jpg)
Decision Tree for Water Management
Decision
• Figure 11-8
![Page 152: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/152.jpg)
Utility Curve for Money: $0 to $100
• Figure 11-9
![Page 153: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/153.jpg)
Value of Perfect Information for Water Management Decision
• Figure 11-10
![Page 154: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/154.jpg)
Value of Imperfect Information for Water Management Decision
• Figure 11-11
![Page 155: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/155.jpg)
Cash Flow Diagram and Time Positions
• Figure 12-1
![Page 156: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/156.jpg)
Positive and Negative Cash
Flows
• Figure 12-2
![Page 157: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/157.jpg)
Relationships Between Present, Future and Annual
Values
• Figure 12-3
![Page 158: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/158.jpg)
Example: Savings and Withdrawals
• (a) Deposit $1,000 into bank account
![Page 159: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/159.jpg)
Example: Savings and Withdrawals
• (b) Present value
![Page 160: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/160.jpg)
Example: Savings and Withdrawals
• (c) Deposit at beginning of year
![Page 161: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/161.jpg)
Example: Savings and Withdrawals
• (d) Present value of future withdrawal
![Page 162: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/162.jpg)
Example: Savings and Withdrawals
• (e) Present value of annual payment
![Page 163: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/163.jpg)
Example: Savings and Withdrawals
• (f) Present value at end of 10 years
![Page 164: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/164.jpg)
Example: Savings and Withdrawals
• (g) Annual payments to pay bond issue
![Page 165: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/165.jpg)
Example: Savings and Withdrawals
• (h) Annual payments over 20 years
![Page 166: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/166.jpg)
Example: Savings and Withdrawals
• (i) Present value of four years tuition
![Page 167: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/167.jpg)
Examples of Private Sector and Public Sector Cost-
Benefit Analyses
• Figure 13-1
![Page 168: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/168.jpg)
Comparison of Alternatives by
Different Methods of CBAProject A Purchase Project A Purchase
Park Maintenance Park Maintenance EquipmentEquipment
Project B Purchase Project B Purchase Street Repair Street Repair EquipmentEquipment
Initial Investment Savings
-$8,000 -$8,000
Year 1 $1,000 $6,000
Year 2 2,000 2,000
Year 3 2,000 2,000
Year 4 7,000 1,000
NPV (5%) $2,253 $2,079
NPV (10%) $846 $1,293
B/C ration (5%) 1.28 1.26
B/C ration (10%) 1.11 1.16
Internal rate of return
13.6% 20.3%
Incremental ROR 5% 10%
Payback period 4 years 2 years
![Page 169: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/169.jpg)
Net Present Value Method
• Page 335 NPV =Bt
1+ r( )t
t=0
n
∑⎡
⎣⎢⎢
⎤
⎦⎥⎥−
Ct
1+ r( )t
t=0
n
∑⎡
⎣⎢⎢
⎤
⎦⎥⎥
![Page 170: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/170.jpg)
Benefit-Cost Ratio
• Page 336 B /C =
Bt
1+ r( )t
t=0
n
∑⎡
⎣⎢⎢
⎤
⎦⎥⎥
Ct
1+ r( )t
t=0
n
∑⎡
⎣⎢⎢
⎤
⎦⎥⎥
![Page 171: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/171.jpg)
Internal Rate of Return
• Page 338Bt1+ r( )
tt=0
n
∑⎡
⎣⎢⎢
⎤
⎦⎥⎥=
Ct
1+ r( )t
t=0
n
∑⎡
⎣⎢⎢
⎤
⎦⎥⎥
![Page 172: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/172.jpg)
Comparison of Alternatives by Incremental Rate of
Return AnalysisProject Project
AAProject Project
BBProject Project
CCInitial investment
-$8,000 -$8,000 -$10,000
Year 1 1,000 6,000 5,000Year 2 2,000 2,000 3,000Year 3 2,000 2,000 2,000Year 4 7,000 1,000 4,000Rate of return 13.6% 20.3% 16.2%
![Page 173: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/173.jpg)
Comparison of Alternatives by Incremental Rate of
Return Analysis
First PairwiseFirst PairwiseProject A Project A (challeng(challeng
er)er)
Project B Project B (defende(defende
r)r)
IncrementIncremental Cash al Cash
FlowFlowInitial investment
-$8,000 -$8,000 $0
Year 1 1,000 6,000 -5,000Year 2 2,000 2,000 0Year 3 2,000 2,000 0Year 4 7,000 1,000 6,000Rate of return 13.6% 20.3% 6.3%
![Page 174: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/174.jpg)
Comparison of Alternatives by Incremental Rate of
Return AnalysisSecond Second PairwisePairwise
Project C Project C (challenge(challenge
r)r)
Project B Project B (defende(defende
r)r)
IncrementIncremental Cash al Cash
FlowFlowInitial investment
-$10,000 -$8,000 -$2,000
Year 1 5,000 6,000 -1,000Year 2 3,000 2,000 1,000Year 3 2,000 2,000 0Year 4 4,000 1,000 3,000Rate of return 16.2% 20.3% 9.6%
![Page 175: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/175.jpg)
Distribution of Benefits and Costs:
Positive Net BenefitsSusaSusa
nnLaurLaur
aaDebrDebr
aaJohnJohn
Benefits $10 $100 $10 $10
Costs -$20 -$20 -$20 -$20
Benefits - Costs -$10 $80 -$10 -$10
Net Benefits = -10 + 80 -10 -10 = $50
![Page 176: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/176.jpg)
Distribution of Benefits and Costs: Negative
Net BenefitsSusaSusa
nnLaurLaur
aaDebrDebr
aaJohnJohn
Benefits $20 $20 $20 $20
Costs -$10 -$60 -$10 -$10
Benefits - Costs $10 -$40 $10 $10
Net Benefits = -40 + 10 + 10 + 10 = -$10
![Page 177: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/177.jpg)
Demand for Bridge Crossings
• Figure 14-1
![Page 178: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/178.jpg)
Effects of Sultan Island Bridge
CostsCosts
Previous ferry riders $25,000
New travelers $25,000
Ferry owner -$5,000
Taxpayers -$40,000
Unadjusted net dollar impact $5,000
![Page 179: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/179.jpg)
Effects of Sultan Island Bridge ($0.25
toll)CostsCosts
Previous ferry riders $12,500
New travelers $6,250
Ferry owner -$5,000
Taxpayers -$15,000
Unadjusted net dollar impact -$1,250
![Page 180: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/180.jpg)
Demand for Bridge Crossings (fare of
$0.25)
• Figure 14-2
![Page 181: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/181.jpg)
Demand for Ferry Crossings
• Figure 14-3
![Page 182: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/182.jpg)
Parkview Recreational Facility
Annual CostsCosts/yearCosts/year
Construction and land acquisition costs
$50,000
Forgone tax revenue 10,500
Annual operating expenses 14,000
$74,500
![Page 183: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/183.jpg)
Demand for Parkview
Recreational FacilityAdmission FeeAdmission Fee Annual Number of Annual Number of
UsersUsers$1.20 0
1.10 10,000
1.00 20,000
0.90 30,000
0.80 40,000
0.70 50,000
0.60 60,000
0.50 70,000
0.40 80,000
0.30 90,000
0.20 100,000
0.10 110,000
0 120,000
![Page 184: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/184.jpg)
Demand for Parkview
Recreational Facility
• Figure 14-4
![Page 185: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/185.jpg)
Low-Income and Total Demand for Recreational
Facilities
• Figure 14-5
![Page 186: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/186.jpg)
Price Floor and Price Ceiling
• Figure Q3-1
![Page 187: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/187.jpg)
Consumers vs. Producers Bear Full
Amount of Tax
• Figure Q3-2
![Page 188: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/188.jpg)
Change in Consumer Surplus
• Figure Q4-1
![Page 189: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/189.jpg)
Effect of a Tariff on Social Surplus
• Figure Q7-1
![Page 190: Microeconomics for Public Decisions Anne C. Steinemann](https://reader030.vdocuments.us/reader030/viewer/2022032521/56649d595503460f94a38fc4/html5/thumbnails/190.jpg)
Demand for Parking Spaces
• Figure Q13-1