The Market for Aquarium Cleaners Can Be Defined by the Following

question 51

Essay

The market for aquarium cleaners can be defined by the following set of equations: P is the price of aquarium cleaners in dollars, and Q is quantity in thousands. After their use, aquarium cleaners get washed down the drain and increase the mineral content in streams and rivers increasing the fish population. The government estimates that the external benefit related to the use of each container of aquarium cleaner is $3 and is considering a subsidy of $3 per container of the aquarium cleaner. Using this information answer the following questions. a. What are the market price and market quantity in the aquarium cleaner market? b. What is the social benefit of each container of aquarium cleaner? c. If consumers are offered a subsidy of $3, that would cause the demand curve to shift to the right, and the new equation for the demand curve would be Qd = 40 - 3(P - 3). What is the efficient quantity traded in this market as a result of this subsidy? d. Draw a graph to illustrate the old and new equilibriums in this market (before and after the subsidy). e. What is the dollar amount of the deadweight loss that has been removed from this market as a result of the subsidy?

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Definitions:

Information Processing

A theory describing how the human mind takes in, stores, retrieves, and uses information.

Stereotype Threat

The risk of confirming negative stereotypes about an individual's racial, ethnic, gender, or cultural group, which can hinder performance in various domains.

Sensory Loss

A decrease or loss in the ability to perceive or process external stimuli through one's senses, such as sight, hearing, touch, taste, or smell.

Compensation

A system of rewards or payments, often applied in work contexts, but also refers to psychological strategies individuals use to cover up weaknesses.