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In Paris, hundreds of small bakeries produce bread for sale to their customers at a marginal cost of MC = 2 + 0.1Q. The inverse demand for bread is given by P = 10 - 0.1Q, where P is in euros per loaf and Q is loaves per hour. The baking of bread also creates a positive externality: There is nothing quite like the smell of fresh-baked bread. Tourists and residents receive external marginal benefits given by EMB = 2 - 0.02Q.
a. Find the quantity of bread produced in Paris in the absence of any government intervention.
b. To achieve the socially optimal output, government can use a price-based intervention. Determine the ideal measure for government to use to achieve this goal. Specify both the type of policy and its magnitude.
Would your answer change if you thought different German and Japanese policies might facilitate different U.S. policies?
In a closed economy the following holds: Household consumption C is given by the consumption function: C = 100 + 0.75Yd Planned investments are I = 250 (independent of Y ). Household disposable income: Yd = Y - T, where Y is production. Taxes depend ..
Consider the simple linear regression model without an intercept, y = ß1x + u, with the assumption E(u|x)=0. Also assume that E(x)=0 Show that E(y)=0 and using this as well as E(x)=0 show that the covariance between x and y is given by E(xy) and that..
The maintenance costs associated with an investment are $0 for the first 8 years and $ 700 per year thereafter. The investment has an infinite life. With interest at 9 % per annum, determine the present worth of the annual disbursements.
Suppose that the economy starts at equilibrium and the mpc =0.8. What would be the effect of a 500 increase intaxes once all the rounds of the multiplier process are complete
Calculate the new equilibrium interest rate and quantity, and explain why the direction of the interest rate shift makes intuitive sense.
And which would you consider more likely, that longer-term U.S. government bonds have a higher interest rate than short-term U.S. government bonds, or vice versa? Explain
Suppose a man receives an initial annual salary of BD 30,000, increasing at the rate of BD 2500 a year. If money is worth 10%, determine his equivalent uniform salary for a period of 8 years.
The ground input is the velocity vi(t) Construct a model of this system that, if solved, would predict the vertical motion time history of the vehicle. Since h(t) is very small, it is all right to consider the relative motion between base and skir..
If firm A decides to adopt the innovation and firm B decides not to adopt it, A earns $20 (minus the cost of the innovation) while B earns $0. If firm A adopts the innovation and firm B adopts it as well, each firm earns $15 minus the cost of the ..
Can you find some value for the interest rate that will change her decision?
What single sum of money at t=6 is equivalent to the following cash flow profile if i=10%? N cash flow 1 -400 2 100 3 100 4 100 5 0..
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