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The only road connecting two populated islands is currently a freeway. During rush hour, there is congestion because of the heavy traffic. The marginal external cost from congestion rises as the amount of traffic on the road increases. At the current equilibrium, the marginal external cost from congestion is $5 per vehicle. Would a toll charge of $5 per vehicle lead to an economically efficient amount of traffic? If not, would you expect the economically efficient toll to be larger than, or less than $5?
Financial engineering deals with the design of new assets. Draw the payoff (at t=1) of the following bull butterfly spread: Purchase 1 call with exercise price a Sell 2 ca
Movements along the supply curve Movements along the supply curve are brought about by changes in the price of the commodity. When price increases from P1 to P2, quant
Elastic Supply Supply is said to be price elastic if changes in price bring about changes in quantity supplied in greater proportion. Thus, when price increases, quantity sup
define equi marginal principle
Suppose that the present level of income in the economy is $700 billion. It is determined that in order to decrease the unemployment rate to the desired level, it will be essential
Limitation The degree or success with which the central bank can use its bank rate policy to control the total credit in the economy depends upon the interest elasticity of in
SEARCH THEORIES - A BRIEF' HISTORICAL OVERVIEW A search theory of unemployment is found even in the writings of A. C. Pigou in the inter-war period. To explain the high
THE BUDGET The budget is a summary statement indicating the estimated amount of revenue that the government requires and hopes to raise. It also indicates the various sources
The production function can have many uses. It can be used to compute least-cost factor combination for a given output or maximum output combination for a given cost. Knowledge of
gap between economic theory and business practice
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