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Consider the industry for making plastic cups. The process of producing the cups generates pollution. Assume the marginal damage function of pollution is given by MD = 4E, where damages are measured in dollars and E is the level of emissions. Assume further that the marginal abatement cost function is given by MAC = 100 − E, where costs are measured in dollars and E is the level of emissions.
(a) Propose the efficient emission standard for this industry.
(b) Assume the Environmental Protection Agency has a limited budget (an easy assumption to believe) and can only detect violations of the standard 25 percent of the time. Assume that firms know this, and the industry adjusts accordingly. If the government set a fine of $80 for each unit in excess of the efficient level, what is the expected level of emissions in the industry?
(c) Sketch a graph that depicts the cost to society from undercompliance with the efficient emission standard. (d) Propose a fine for caught violations that would implement the efficient level of emissions. Justify your proposal.
Demand for football tickets at a state university is Qd x = 80, 000−12, 000p. The capacity of the stadium at that university is 50,000 seats (In other words, Qs x = 50, 000). a. Find the marginal revenue curve that corresponds to the demand curve. Fi..
Suppose that competition amongst bond brokers causes bonds to become more liquid. Using the liquidity preference model, show graphically how this will affect money demand and the nominal interest rate.
Suppose the own price elasticity of demand for good X is -3, its income elasticity is 2, and the cross price elasticity of demand between good X and Y is -5. Determine how much the consumption of this good will change if:
Which of the following would eliminate scarcity as an economic problem? Moderation of people’s competitive instincts. Discovery of large new energy reserves. Resumption of steady productivity growth. None of the above because scarcity cannot be elim..
You operate your own small building company and have decided to bid on a government contract to build a pedestrian walkway in a national park during the coming winter. The walkway is to be of standard government design and should involve no unexpecte..
How is the market for gasoline affected if the excise tax on gasoline is? reduced?
Explain how does the subsidy affect consumer surplus, producer surplus, tax revenue, and total surplus. Does a subsidy lead to a deadweight loss. Explain
Average tax rate is. If Social Security were considered part of the general budget then, Critics of food stamps argue that low income should be given cash payments rather than food vouchers. What are their arguments?
Explain and discuss view that at beginning of 21st century in US, key macro-finance ratios were such that a decade of negligible real returns to stocks was in prospect. Are key financial ratios useful for forecasting returns to major asset classes..
Statistical Methods in Business & Economics – Final Exam BUS405 (2009A), best estimate of the correlation coefficient
A stamping machine is classified as seven-year MACRS property. The cost basis for the machine is $120,000, and the expected salvage value is $10,000 at the end of 12 years. Compute the book value at the end of three years for tax purposes.
All firms in a Cournot monopolistically competitive industry have the same cost function C(q) = 25 + 40q. Market demand is Q(p) = 140 − p. Calculate the equilibrium price, firm output, total output, and number of firms in the industry.
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