Canada: Electric Vehicle Subsidy Program Even though controversial, electric vehicles (EVs) seem to be more environmentally friendly than gasoline-fueled vehicles. The Canadian government has been encouraging Canadians to purchase EVs by offering consumers some subsidies. Because you can multi-task, your boss at Aeon Insights has assigned you to analyze three different policies. Your first task is this EV subsidy policy assessment. From published studies, you know the following information: Demand for EVs: P = 100,000 - 500Q Supply of EVs: P = 40,000 + 500Q Positive externality: At $10,000 per EV because of the expected cut in carbon dioxide emission. To help visualize the situation, you constructed Figure 1 below to examine Questions #1, #2, #3 and #4: Supply Po Du Demand Figure I: Electric Vehicle Subsidy Policy #1: The government does not intervene. Before any government intervention, the social surplus (SS) is equal to O a. $2.400.000 O b $1,800,000 O. $2,100,000 Od. $5.700,.000

Canada: Electric Vehicle Subsidy Program Even though controversial, electric vehicles (EVs) seem to be more environmentally friendly than gasoline-fueled vehicles. The Canadian government has been encouraging Canadians to purchase EVs by offering consumers some subsidies. Because you can multi-task, your boss at Aeon Insights has assigned you to analyze three different policies. Your first task is this EV subsidy policy assessment. From published studies, you know the following information: Demand for EVs: P = 100,000 - 500Q Supply of EVs: P = 40,000 + 500Q Positive externality: At $10,000 per EV because of the expected cut in carbon dioxide emission. To help visualize the situation, you constructed Figure 1 below to examine Questions #1, #2, #3 and #4: Supply Po Du Demand Figure I: Electric Vehicle Subsidy Policy #1: The government does not intervene. Before any government intervention, the social surplus (SS) is equal to O a. $2.400.000 O b $1,800,000 O. $2,100,000 Od. $5.700,.000

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 7E

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Recently, Verizon Wireless ran a pricing trial in order to estimate the elasticity of demand for its services. The manager selected three states that were representative of its entire service area and increased prices by 5 percent to customers in those areas. One week later, the number of customers enrolled in Verizon’s cellular plans declined 4 percent in those states, while enrollments in states where prices were not increased remained flat. The manager used this information to estimate the own-price elasticity of demand and, based on her findings, immediately increased prices in all market areas by 5 percent in an attempt to boost the company’s 2016 annual revenues. One year later, the manager was perplexed because Verizon's 2016 annual revenues were 10 percent lower than those in 2015—the price increase apparently led to a reduction in the company’s revenues.Did the manager make an error? Explain
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Recently, Verizon Wireless ran a pricing trial in order to estimate the elasticity of demand for its services. The manager selected three states that were representative of its entire service area and increased prices by 5 percent to customers in those areas. One week later, the number of customers enrolled in Verizon’s cellular plans declined 4 percent in those states, while enrollments in states where prices were not increased remained flat. The manager used this information to estimate the own price elasticity of demand and, based on her findings, immediately increased prices in all market areas by 5 percent in an attempt to boost the company’s 2012 annual revenues. One year later, the manager was perplexed because Verizon’s 2012 annual revenues were 10 percent lower than those in 2011—the price increase apparently led to a reduction in the company’s revenues. Did the manager make an error? Explain
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