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Suppose Merck is developing new drugs that have positive externalities; the positive externality is a pharmaceutical technology we all benefit from. Let the supply curve for Merck’s production be P =Q/4, where Q is the number of units of drugs they’ve developed. For each unit, the value of the positive externality is $2.
Assume market demand for these drugs can be written as Q=14-2P.
a. What is Qp in this market?
b. What is the socially optimal level of drugs bought and sold?
c. What is the deadweight loss in the free market resulting from the externality?
d. What would be the level of the Pigovian subsidy that would eliminate the deadweight losses due to the externality?
Suppose the dollar interest rate and the pound sterling interest rate are the same 5 percent per year. What is the relation between the currency equilibrium $/£ exchange rate and its expected future level?
Chris is renting a house, and it does not have a refrigerator. A refrigerator is worth $3 every day because Chris will eat out less. Chris has a discount rate of 18%. Refrigerators usually last 5 years. How much is Chris willing to spend on a refrige..
Draw the Hick's income and substitution effects for c1,c2 in c1,c2 space if the interest rate decreases to .05.
Using the concept of price elasticity explain why the price of basic commodities has to be regulated in price rise.
Four years after the $13,500 deposit, half of the accumulated funds is transferred to a fund that pays 8% interest compounded quarterly. How much money will be in each account six years after the transfer?
annual profits which estimate to be 85 million per yr for a 20 yr period. at a corporate MARR of 10% per year, Does project indicate it will make at least the MARR.
Evaluate this monitoring system. What would you do differently? Consider the benefits as well as costs of any change you recommend.
The net result was the Japan's automobile industry improved its productivity throughout this period relative to the US, which generally just kept up with inflation due to its already high rate of accumulated experience also relatively slow growth.
Describe the coefficient of correlation between the two variables. Interpret the value. Is it reasonable to conclude that there is a positive relationship between revenue and occupied rooms.
If all firms, existing and potential new entrants, face decreasing industry costs in the long run under perfect competition, the industry supply curve will: Necessarily be upward sloping
Assume that the returns of these stocks are independent of each other. Find the mean and standard deviation of the total amount that this investor earns in one year from these four investments.
In terms of aggregate supply, a period in which nominal wages and other resource prices are unresponsive to price-level changes is called the A. long run. B. short run. C. very long run. D. immediate market period.
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