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(1) The federal government is considering selling tracts of federally owned land to private developers and using the revenues to provide aid to victims of an earthquake in a foreign country. How would this policy affect the levels of federal revenues, expenditures, and deficits under a cash accounting system? What would be different under a capital accounting system?
(2) A government is considering paving a highway with a newly developed "wear-proof" material. Paving the highway would cost $2 billion today, but it would save $300 million in maintenance costs for each of the next 10 years. Use the concept of present value in maintenance costs for each of the next 10 years. Use the concept of present value to determine whether the project is worth undertaking if the government can borrow at an interest rate of 5 %. Is it worth it if the interest rate is 0 %? 10 % ? A politician says to you, " I don't care what the interest rate is. The project is clearly a good investment: it more than pays for itself in only 7 years, and all the rest is money in the bank." What's wrong with this argument and why does the interest rate matter?
(3) Suppose that demand for a product is Q-1200- 4P and supply is Q= -200 +2P? Furthermore, suppose that the marginal external damage of this product is $8 per unit. How many more units of this product will the free market produce than is socially optimal? Calculate the deadweight loss associated with the externality.
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critically examine the statement that privatization can always decentralize economic power
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It has been accepted to most policy and development economists that among the most important sets of institution in an economy are those that provide for enforcement of contracts.
Q. Importance of heterogeneity? The importance of heterogeneity for public policy process can be summarized in two propositions. - Heterogeneity or conflict of interests is
A dam is proposed on a stretch of wild river, a river that is currently used for recreation. The dam will generate electricity. The dam will have a useful life of 50 years, after w
Q. Define Heterogeneity? We know that breaking of the assumptions of homogeneity of agents, in welfare economics, makes it difficult to define social welfare function. Breakin
The marginal external cost associated with the emissions of sulfur dioxide is estimated to be $30 per pound of this chemical per year. Assume that each ton of steel produced per ye
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