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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?
Suppose that the price elasticity of demand for cereal is -0.75 and the cross-price elasticity of demand between cereal and the price of milk is -0.9. If the price of milk rises by
Features of Free Market System The features of a free market system are: (i) Ownership of Means of Production Individuals are free to own the means of producti
The most significant uses of the price elasticity of demand, used specifically in business decision-making. It refer to the relationship between price elasticity and the marginal c
Laws of returns to scale alludes to the long-run analysis of the laws of production. In the long run, output can be increased by varying all factors. So in this section we study th
Marginal Revenue (MR) This is the increase in Total Revenue resulting from the sale of an extra unit of output. Thus, if TR n-1 is Total Revenue from the sale of (n-1) units
A firm with market power has estimated the following demand function for its product: Q = 12,000 – 4,000 P where P = price per unit and Q = quantity demanded per year. The firm’s t
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
You have been provided with daily data starting in January 2009 on the main New Zealand stock market index, the NSX-50. Choose a suitable model for measuring volatility on the New
In the country of Sleep-well, the inhabitants' main activity is... sleeping. Despite the loss of productivity that this entails, the country has a profuse and renowned production o
Find price for demand of 105000 exhaust fans, function is 462-5/7q for demand and p-6/7q for supply. find supply at 312, equilibrium qt and price
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