This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods.
Figure 10-3

-Refer to Figure 10-3.Assume that the concert organizers must purchase a concert permit before organizing the concert and that the cost for the permit is included in the private cost curve.What criteria should the city use in determining whether or not to issue a permit?

Question

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods.
Figure 10-3
 
-Refer to Figure 10-3.Assume that the concert organizers must purchase a concert permit before organizing the concert and that the cost for the permit is included in the private cost curve.What criteria should the city use in determining whether or not to issue a permit?

Quizplus · Accepted Answer

The city should issue the permit as long as the total value to consumers of the concerts exceeds the total cost of the concerts, including any external costs. This ensures that the benefits outweigh the costs, and the market is operating efficiently. The majority vote of residents or the restoration of the park to its original condition may not necessarily address the issue of external costs and could lead to an inefficient outcome. Identifying and addressing the external costs directly is a better solution.

This Figure Reflects the Market for Outdoor Concerts in a Public