When young students are hungry, they can be disruptive and inattentive in class. Thus, providing lunch to students has external benefits. The figure above represents the market for school lunches before and after government vouchers are issued
a. What is the unregulated private market equilibrium?
b. What is the efficient quantity of lunches?
c. What is the amount of the voucher necessary to move the economy to the efficient number of lunches?
d. When vouchers are used, what is the dollar price of the lunch that suppliers receive and what is the dollar price that consumers pay when the voucher is used?
a. If the market is left unregulated, 4 million school lunches per day will be served and the price will be $1.50 per school lunch.
b. The efficient quantity of lunches is 6 million school lunches per day.
c. The amount of the voucher is $1.00.
d. The dollar price of the lunch received by sellers is $2.00. The consumers have a voucher for $1, so the total dollar price paid by the consumers is $1.00.
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