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George and Jane are next-door neighbours. George likes listening to pop music at high volume but hates opera. Jane likes listening to opera at high volume but hates pop music.
a) What is the externality in the above case?
b) Both George and Jane complain about their neighbour to the landlord. What kind of ‘regulation’ can the landlord implement to solve the problem? Is this direct regulation efficient? Explain your answer.
c) According to the Coase theorem, how might George and Jane reach an efficient outcome on their own?
d) Why might the Coase theorem not work in reality?
Critically analyze the pros and cons of putting a price ceiling on prescription medicine. Make sure to use concepts from both chapters seen this unit such as government intervention, inefficiencies, price elasticity, etc. in your answer.
Calculate the total fixed costs, total variable costs, average fixed costs, average variable costs, average total costs, as well as marginal costs.
Assume Hailey's Utility Function is U = x^2 y . The price of X is $8 per unit and the price of Y is $2 per unit. Her income is currently $240 / month. Determine her utility maximizing quantities of x and y. Suppose the price of X goes down to $4 per ..
A student is shown four envelopes. Envelope A contains $2,000; envelopes B, C and D contain uncertain amounts of money but with the following probabilities: Envelope B -- $5,000 with a 10 percent probability, $2,000 with an 88 percent probability, an..
Let D equal the domestic demand for oil, Sd equal the domestic supply and Si equal imported supply of oil for gasoline. Assume the world supply is infinitely elastic and the domestic supply is more price sensitive. Assume we currently import some oil..
Suppose that the short-run price elasticity of the supply of gasoline is 1.6. If the price falls by 5%, the quantity supplied will change by _________.
Mirk Labs is a pharmaceutical company that currently enjoys a patent monopoly in Europe, Canada, and the United States on Zatab, an allergy medication. The global demand for Zatab is: Qd = 15.0, 0.2P where Qd is annual quantity demanded (in millions..
President John F. Kennedy proposed a tax cut in the early 1960s. He said, "It is a paradoxical truth that tax rates are too high today and tax revenues are too low, and the soundest way to raise tax revenues in the long run is to cut tax rates now." ..
Illustrate what will be the total consumer surplus to those consumers.
Suppose that in addition to repairing your car, you can also spend money advertising. If you repair your car for hours and spend A dollars advertising, your benefit (the amount you revive when you sell your car) is B(H,A)=220H-H^2+2A. Both H and A ar..
The total demand as well as for money is equal to the transactions demand as well as plus the asset demand as well as for money.
According to the product cycle hypothesis, a product will be produced only in an industrialized economy. When
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