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As the newly elected governor of Iowa, you have taken "the pledge" to promote biofuels. Currently the marginal cost of conventional diesel is $3 per gallon and the marginal cost of biodiesel is $3.25/gallon. Assume for this question that from a consumer perspective biodiesel and diesel are perfect substitutes and consumers will just buy whichever is cheaper. In addition, assume that each gallon of diesel does $1 of damage to the climate and that each gallon of biodiesel does only 50¢ of damage. You feel like should instead impose a tax on both fuels that reflect their damages. Your Stanford educated advisor suggests that you subsidize biofuels by the difference in damages between the two fuels, 50¢/gallon. That way the relative prices of the two fuels would correctly reflect the relative damage they impose. She says that the cost advantage of biodiesel is the same either way, but taxes are harder to sell politically. You still argue for the tax. Why?
Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.
Some commentators have argued that the failure of the “Super committee” is good thing for the economy? Do you agree?
Case study analysis about optimum resource allocation: - Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..
Questions: : Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month? Explain your choice.
Problem - Total Cost, Average Cost, Marginal Cost: - Complete the following table of costs for a firm. (Note: enter the figures in the MC column between outputs of 0 and 1, 1 and 2, 2 and 3, etc.)
Problem based on Oligopoly and demand curve, Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another?
Explain the impact of external costs and external benefits on resource allocation; Why are public goods not produced in sufficient quantities by private markets? Which of the following are examples of public goods (or services)? Delete the incorrec..
Describe the differences between shifts in demand and movements along the demand curve. What are the main factors which can shift the demand curve? Explain why they cause the demand curve to shift. Use examples and draw graphs to support your discuss..
Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:
Long-term Growth, International Trade & Globalization:- This question deals with concepts such as long-term growth, international trade and globalization. Questions related to trade deficit, trade surplus, gains from trade, an international trade sce..
"Does the economic bailout of Spain and Greece spell the beginning of the end for the European Monetary Union (EMU)?"
Read the rules of the game, the overview and the almanac for the Development Game "Settlers of Catan"
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