Estimate the total opportunity cost, Business Economics

In the absence of taxes, subsidies or other distortions, the market demand and supply for bags of cement would be given by QD = 1500 - 10P and QS = 140P, respectively, where Q is quantity of cement in bags per day, and price (P) is measured in dollars per bag.  For some reason, a distortionary subsidy of $2.50 per bag is offered to the competitive firms that supply this market.  A proposed project will use 75 bags of cement per day.  [For all parts of this question, please show and briefly explain all of your calculations.  Be sure to express any numerical answers in the correct units of measure, such as $/day, or $/bag.]

(a)  Estimate the total (social) opportunity cost of the 75 bags of cement per day. 

(b) Estimate the shadow value or social opportunity cost per bag of cement to be used by the proposed project.

(c) Prepare a diagram that shows the market for cement, with and without the project's cement purchases. 

(i) Label the subsidy-inclusive quantity-price pairs, with (E1) and without (E0) the project. 

(ii) Shade and label an area that best represents your answer to (a).

(d)  Estimate and report (numerically to two decimal places) the size and direction of the change in each of:

 (i) Consumers' surplus (only for non-project consumers),

(ii) Producers' surplus,

(iii) Project expenditures on cement, and

(iv) Government subsidy payments to cement sellers.  

(e) In a single sentence, relate the answers in part (a) to the four dollar values derived in part (d).

Posted Date: 2/19/2013 2:19:17 AM | Location : United States







Related Discussions:- Estimate the total opportunity cost, Assignment Help, Ask Question on Estimate the total opportunity cost, Get Answer, Expert's Help, Estimate the total opportunity cost Discussions

Write discussion on Estimate the total opportunity cost
Your posts are moderated
Related Questions
Why do you assume there are an increasing number of organisations related along with the development of quality practices for IS development? Information systems frequently rep

I want to do few projects on this topic.

QUESTION Write short notes on any three (3) of the following: (a) National income and the standard of living. (b) Globalization and its implications for developing countr

What are factor endowment implications? Implications of factor endowment: • Less Developed Countries to specialise and export labour intensive goods, agriculture or commodit

QUESTION (a) Explain the relationship between scarcity, choice and opportunity cost. (b) What is market failure and why does it occur in an economy? (c) Differentiate, us

Can less developed countries economies grow by developing its primary sector as agriculture? Less developed countries economies can grow by developing its primary sector as ag


visit to village panchayat for agriculture based project

analyse the effect of an increase in the price of sim cards on the equilibrium price and equilibrium quantity of cellphones handsets

Consider the following four CP investors: Series A: $5m FV (and 2X liquidation preference) or converts to 5m shares; Series B: $10m FV or converts to 8m shares; Series C: