Briefly discuss whether giving increased subsidies to firms providing public bus services in cities would correct market failure arising from congestion in the city
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Briefly discuss whether giving increased subsidies to firms providing public bus services in cities would correct market failure arising from congestion in the city
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- The United States government subsidizes many so-called green companies. For instance, it has given millions of dollars to solar panel companies. In the market for solar power, illustrate what the government subsidies mean.Power stations emit sulfur dioxide as a waste product. This generates a cost to society that is not paid for by the firm; therefore, pollution is a negative externality of power production. Suppose the government wants to correct this market failure by getting firms to internalize the cost of pollution. To do this, the government can charge firms for pollution rights (the right to emit a given quantity of sulfur dioxide). The following graph shows the daily demand for pollution rights.Firm A produces good X and Firm B produces good Y with the following demand functions: Qx = 150 - 10Px - 4Py Qy = 75 - 5Py - Px Price of good X is $8 and price of good Y is $4. Firm A and Firm B will merge together. The firms have announced that price of good Y will decrease by 1 percent. Will the Department of Justice allow the merger? Show mathematically and very briefly explain.
- Suppose that the demand curve for cigarettes in Euroland is given by QD = 26.9 − 1.71P , and that the supply curve is given by QS = 9.62 + 2.13P. The equilibrium price is €4.50 and the equilbrium quantity is 19.2.The government is thinking about imposing a tax of €0.40 on cigarettes.The price that suppliers will receive after the tax is €4.10€4.32€4.72€4.50The table below shows the demand for pollution permits to emit hydrocarbons in a particular industrial park. Each permit allows the owner to release one tonne of pollutants into the atmosphere. Price perPollution Permit Quantity of Permits $4,500 75 4,000 150 3,500 225 3,000 300 2,500 375 2,000 450 1,500 525 a. If no fee for a pollution permit were charged, how many tonnes of pollutants would be discharged into the atmosphere, assuming a straight-line demand curve? Quantity: tonnesb. Suppose government were to set a fee of $3,500 per pollution permit. How many tonnes of pollutants would now be dumped? What is the total revenue received by government? Quantity: tonnes Total revenue: $ c. Suppose that a new technology allows for a significant reduction in hydrocarbons at a relatively low cost so that the demand for pollution permits in the industrial park drops by 150 tonnes. Assuming that government holds the permit fee at $3,500, how many tonnes of…Consider a situation in which two countries, Home and Foreign, can produce a good that is subject to external economies of scale. Assume that firms in both countries face the same average costs curve (AC), given by: AC = m + r/(s+q) where m=3, r=20, s=2 and Q indicates quantity. The demand curves are given by, respectively: Q= b - P for Home and, Q = b* - P for Foreign, where b=20 and b*=40 . Q indicates quantity and P indicates price. Answer the following questions: Plot the AC curve and the demand curve for both Home and Foreign in the same graph (put quantity in the x-axis and price and cost in the y-axis. (Please do not use python to plot the graph and would appreciate a picture of the graph). Assume that both countries are closed to international trade. Compute the equilibrium price and quantity in both countries. Assume that these two countries open to trade with each other. Which country will produce the good? Explain why. What are the benefits of international trade…
