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Consider a binary choice to allow or not the emission of pollutants. The cost to consumers of allowing the pollution is C = 2,000, but this cost is only observable to the consumers. The benefit for the polluter of allowing the externality is B = 2,300, and only the polluter knows this benefit. Clearly, optimality requires this externality is allowed, since B > C. However, the final decision must be based on what each party chooses to reveal.
a. Construct a tax-subsidy revelation scheme such that it is a dominant strategy for each party to report truthfully their private information.
b. Show that this revelation scheme induces the optimal production of the externality.
c. Show that this revelation scheme is unbalanced in the sense that the given equilibrium reports the tax to be paid by the polluter is less than the subsidy paid to the pollutee.
State what is its distribution under the null and why and explain the conditions under which you would reject H0
Profit Functions and Optimal Investment - Derive the optimality condition, or intertemporal Euler equation, for investment I1 - Write the optimality condition for investment It. Explain the intuition behind this equation in words.
PC Connection and CDW are two online retailers that compete in an internet market for digital cameras. While the products they sell are similar, the firms attempt to differentiate themselves through their service policies.
Your company is considering purchase of a new DNA analyzer for $250,000. This should open up a new business revenue stream for product testing which will produce $80,000 per year in revenue. Annual operating costs are estimated at $10,000 per ye..
If the local government can enforce a rent-control law that sets the maximum monthly rent at $1000, will there be a surplus or a shortage? Of how many units? Explain how the market can adjust?
Seth could consume $120 next year if he saved all his current earnings. He expects to earn nothing next year. The intertemporal budget constraint for Seth is given by the equation C2 = 120 - 1.2C1 where C1 = possible consumption in year 1 and C2 =..
you can invest in a project with returns that depend on the amount of your investment. Specifically, the formula relating next year's payoff to your investment today is C1=(-C0 -0.1)^(1/2), c1 c2 are in million dollars.
Online Tutors offers monthly access to students for either or both math or science tutors. A market study found that the served by Online Tutors can be divided into two types of students: students needing help with math
A monopolist faces a demand curve given by: P = 220 - 3Q, where P is the price of the good and Q is the quantity demanded. The marginal cost of production is constant and is equal to $40. There are no fixed costs of production. How much output sho..
i need a specific paragraph long answer to this question full 750 awarded to whoever helps the most thanks what is the
A probability density function shows the probability for each value of X.The variance of X must be non-negative; the variance of Y must be non-negative; hence the covariance of X and Y must be non-negative _If X is a uniformly distributed random v..
Market research at Apple Corporation has shown that the demand function for its new iPhone is as follows: QA = 3 - 0.02PA + 0.0002I + 0.01PS where QA is the quantity demanded (in thousands) of iPhones, PA is the price of an iPh..
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