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Private or social cost-benefit analysis

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Reference no: EM133065449

1. Say a local government will build a new office center and offers to purchase gasoline to compensate employees who must now commute further distances. The government plans to buy the gas from a state-owned refinery for a fixed price of $3 per gallon. This is not the market price, which would be set by:

Qd = 240-20 Px Qs = 40 Px

-Determine what the free market equilibrium would be for gasoline and discuss its usage in a private or social cost-benefit analysis

-Determine the shadow price (or full economic price) of the marginal unit of gasoline in this distorted market and discuss it's usage in social cost-benefit analysis.

Reference no: EM133065449

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