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Second Best Pricing
Assume the MTA’s production cost curve is given by C=1,200,000,000 + 3.5q where q denotes the number of subway trips. From past fare changes we know that a 20% drop in fares will increase the number of transit trips by 4%. In contrast, the fare drop has lowered the number of automobile trips by only 0.2%. Currently, the ratio automobile trips to transit trips is 20. Current the private cost of the average automobile is $1.20. However, it’s overall social marginal cost is $3.20. Calculate the first best transit fare per trip.
a) Calculate the first-best transit fare per trip.
b) Calculate the second-best transit fare per trip.
Discuss a real world example that could, or has already, caused a shift in either the AD (aggregate demand) or SRAS (short run aggregate supply) curves for the US economy, or some other country.
Imagine you have $20000 and you are willing to invest. A safe investment that promises to pay 5% profit after 1 year. A risky investment that has a 20% chance you might loose half of your money. How much do you expect to get paid for a year in the s..
The most likely reason that oil prices spiked during 2007-2008 was because
A perfectly competitive industry has a large number of potential entrants. all firms have identical cost structure and minimize cost at the same point where Min AC=MC. what will be the new market equilibrium price and quantity?
A person you trust asks you to loan them $2,000 at the end of year 1, $1,000 at the end of year 2, nothing in year 3, and then they will pay you $1,000 in year 4, $2,000 in year 5, and $3,000 in year 6. If you make 12% per year on your investments, d..
Consider a market where demand is d:p=24-Q and supply is s:p=2+Q. impose a specific tax t= $2 on each unit sold in the above market.
Economists who support minimum-wage legislation are likely to believe that the. Which of the following statements illustrates diminishing marginal utility? Adverse selection--buyers of life insurance will likely have higher than the average death rat..
Should a company hire temporary workers or hire new workers to handle increase demand for the company's product.
Suppose that the U.S. government decides to charge beer consumers a tax. Before the tax, 15 billion cases of beer were sold every year at a price of $7 per case. After the tax, 9 billion cases of beer are sold every year; consumers pay $10 per case (..
The following graph shows the market for loanable funds in a closed economy. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds.
q.assume a country the total holdings of banks were as followsrequired reserves 45 millionexcess reserves 15
Bartling Energy Systems recently reported $9,250 of sales, $5,750 of operating costs other than depreciation, and $700 of depreciation. The company had no amortization charges.
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