1) 60pts a. Draw ONLY the PRIVATE market for face masks in private equilibrium in the US
PRIOR to the outbreak of the Corona Virus where the equilibrium price is $2 and
100,000 masks are sold. Assuming that the most anyone would pay is $10 for a
mask and the cheapest one to make is $1 show and calculate the Consumer and
Producer Surplus; what is the value of Total Surplus? Show your work.. Be sure
to label each axis, your lines, points, etc. (20pts)
b. Now on that same graph show what happens to this market when the Corona
Virus hits the US. What happens to Equilibrium Price, Equilibrium Quantity,
Supply, Demand, Quantity Supplied & Quantity Demanded? (15 pts)
C. Now on the same graph include the PUBLIC market after the Corona Virus hits
and show if masks are an externality market. Are they a positive or negative
externality? Label your graph including the dead weight loss. (15pts)
d. How might the government correct the externality? (5pts)
e. Give another example of an externality not in class or in the book, is it positive or
negative, how might it be corrected? (5pts)