This question is based on the current Covid-19 pandemic. Suppose the risk of being infected or...

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Economics

This question is based on the current Covid-19 pandemic. Supposethe risk of being infected or infecting others while eating inrestaurants is high. Consider the market for dine-in restaurantmeals. Is there a discrepancy between the marginal private andsocial benefit (or cost)? Show on a graph the quantity ofrestaurant meals that would be sold and the quantity that wouldmaximize economic surplus. Is there a discrepancy between the two?What solution do you think would be most appropriate to deal withthis? What solution was taken by most governments? Do you agreewith it or not?

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4.4 Ratings (637 Votes)

SolutionThere is a negative externality associated with eating at dinein restaurants The person coming in close association with theinfected ones will have to bear that cost Thus marginal socialcost will be more than marginal private See Answer

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