What is the shadow price of the output

Assignment Help Business Economics
Reference no: EM131109493

Assume that a competitive market has an upward-sloping supply curve and a downwardsloping demand curve, both of which are linear. A tax of $0.10 per unit is currently imposed in the market. Suppose that with the tax the equilibrium quantity is 70,000 units. Now suppose a government project purchases 5,000 units of output from this market, causing its equilibrium price to rise from $1.10 to $1.20 per unit. Further suppose that of the total units purchased, 3,000 units purchased for the government project comes from displaced demand. a. Use Method (1) to measure the net social welfare change that results from the government project (give numerical values for ΔTB, ΔTC and ΔNSW). b. Use the Quick-and Dirty Method to measure the net social welfare change that results from the government project. c. What is the shadow price of the output?

Reference no: EM131109493

Questions Cloud

What is the uniform annual payment : What is the uniform annual payment for 12 years is equivalent to the above payment if the interest rate is 8%?
Think the international relations : What do you think have been the benefits and losses to consumers in the USA? Why? How do you think the international relations between the USA and China have been affected? Why? Update the case result with new information.
Considering two alternative proposals for sources of energy : An electric utility is considering two alternative proposals for new sources of energy. One is a major hydroelectric dam (a 70-year project from construction to end-of-life); the other is a thermal power plant (a 35-year project from construction to ..
Consider low-wage labour market : Consider a low-wage labour market. Workers in this market are not presently covered by the minimum wage, but the government is considering implementing such legislation. If implemented, this law would require employers in the market to pay workers a ..
What is the shadow price of the output : Assume that a competitive market has an upward-sloping supply curve and a downwardsloping demand curve, both of which are linear. A tax of $0.10 per unit is currently imposed in the market. Suppose that with the tax the equilibrium quantity is 70,000..
Resolve this problem you are running consumption model : Keynesian consumption model has been criticized on the ground that assumes constant MPC. To resolve this problem you are running the consumption model for US economy as: C = 0 + 1 Y^2 +U a. Explain how this model can remedy the problem of Keynesian c..
How much does zooey owe or receive from the government : Zooey is a single mother of two young children whose husband died in a tragic car accident. She earns $20,000 per year working as a cashier at a grocery store. The government uses a negative income tax system in which Taxes owed = (1/4 of income) - $..
Extremely high incidences of speeding in bathlaham : There are extremely high incidences of speeding in Bathlaham. The fine for speeding is currently $200, and it is estimated that the current probability of a speeding driver being caught and convicted is 5%. Provide an explanation for why speeding is ..
Total social utility will be maximized when marginal dollars : According to a utilitarian, total social utility will be maximized when marginal dollars are distributed to the people with the

Reviews

Write a Review

 

Business Economics Questions & Answers

  What is the marginal revenue from a full flight

Suppose an airline is losing money because they cannot fill enough seats in their flights with passengers. The airline would offer a flight only if at least 70% of the seats could be filled. The average total cost for the typical flight is $12,600. W..

  What are the slopes of the isoprofit lines associated

A family farms corn on their land. They must decide how to produce corn: they can harvest the crop entirely with hours of their own labor (z1), they can harvest entirely by machine (z2), or they can use a combination of labor hours and machine hours...

  Use scholarly sources to support the current debate between

Use scholarly sources to support the current debate between the White House and Congress regarding what measures are necessary to address spending and revenues (e.g., news reports, official statements, press conferences, as well as numerous governmen..

  What is the optimal allocation of care according

Given the following MV information, what is the optimal allocation of care according to the Paretean criteria, when the marginal cost of care is constant at $100? Person A Person B Quantity of Care Consumed MV Quantity

  Elucidate the difference among nominal and real variables

Elucidate the difference among nominal and real variables and give tow examples of each. According to the principle of monetary neutrality, which variables are affected by changes in the quantity of money.

  Suppose that the production function for floppy disks

Suppose that the production function for floppy disks is given by Q = KL2 L3 where Q is the number of disks produced per year, K is machine-hours of capital, and L is man-hours of labor flow of capital service. a) Suppose K=600. Find the total produc..

  Explain how your payoff matrix represents prisoner dilemma

A market is characterized by a demand curve that can be expressed as P = 3000 – 10 Q. Each of the two identical firms currently serving the market has a total cost function of the form C = 250 q. There are no fixed costs. Explain how your payoff matr..

  Indifference curves between charitable contributions

Don is altruistic. Show the possible shape of his indifference curves between charitable contributions and all other goods. Does this indifference curve violate any of our assumptions? Why or why not?

  Current economic growth rate

How does our current economic growth rate compare to some of the other major countries around the world? Explain the relationship between unemployment and gross national product (GNP).

  In the circular economic flow diagram-households

In the circular economic flow diagram, households:

  Annual demand and supply

Annual demand and supply for the Entronics company is given by:QD = 5,000 + 0.5 I + 0.2 A - 100P, and QS = -5000 + 100P

  Firms raise capital from investors

Firms raise capital from investors by issuing shares in the primary markets

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd