Q2. "Since all market allocations are Pareto efficient there can be no justification for any kind of government intervention as it would imply that the free market is being interfered with"-Comment. (6) (Your answer to Q2 should not exceed more than one paragraph).
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- Figure shows the combined production function of Angela and Bruno. If the government introduces a new social welfare program to cater to the poor of the society, wherein the reservation wage increases from 2 bushels of wheat to 6 bushels of wheat how would you model the situation? Draw a new diagram to show the impact of this welfare program and comment on who do you think would benefit from this intervention? Additionally, does the outcome of this intervention results in an allocation which is a pareto efficient one? Explain your reasoning. (Please Make sure your diagram is fully labelled)Suppose that there is an isolated market economy with just one good: money. The market has 1,000 partici- pants and the total value of money is $1 billion. Consider the following allocations. (a) Every participant has $1 million. (b) One person has $2 million, and everyone else has $500,000 (c) One person has $1 billion, everyone else has $0. Which of the above allocations are Pareto optimal and which are not? Why?Consider the figure attached which shows the combined production function of Anna and Bob.Suppose Government has introduced a new social welfare program to cater to the poor of the society, wherein the reservation wage increases from 2 bushels of wheat to 6 bushels of wheat. Draw a new diagram to show the impact of this welfare program and comment on who do you think would benefit from this intervention? Additionally, does the outcome of this intervention results in an allocation which is a pareto efficient one? Explain your reasoning. (Make sure your diagram is fully labelled)
- Consider the figure attached which shows the combined production function of Anna and Bob.Suppose a scenario where the Government has introduced a new social welfare program to cater to the poor of the society, wherein the reservation wage increases from 2 bushels of wheat to 6 bushels of wheat. Draw a new diagram to show the impact of this welfare program and comment on who do you think would benefit from this intervention? Additionally, does the outcome of this intervention results in an allocation which is a pareto efficient one? Explain your reasoning. (Make sure your diagram is fully labelled)Suppose the government establishes a per-unit tax on new car sales. The tax funds will be directed to a new pollution abatement program. Consumers in this market watch the price of cars carefully, since a car purchase represents a significant percentage of consumers’ incomes. On the supply side of the market, the car manufacturers use highly specialized equipment and production processes to produce cars, and find it relatively difficult and costly to quickly move into the production of alternative consumer products. Based on this information above, determine which side of the market (demand or supply) is more price elastic. Make a sketch of the demand and supply in this market, in which the relative slopes reflect the relative elasticities you have noted. On your graph, show the impact of the tax on this market, with your graph showing clearly who will bear the greater percentage of a car tax burden, consumers or producers. (Assume that the sellers make the tax payments to the…1. Consider allocations b-f (meaning points a, b, and f). Which allocations(s) A. are better for Ross than “a” (ignoring Rosa)? B. are better for Rosa than “a” (ignoring Ross)? C. are worse for both Ross and Rosa than “a”? D. are better for both Ross and Rosa than “a”? E. are Pareto superior to “a”?
- Angela and Theresa visit a sporting goods store to buy a new set of golf clubs. Angela is willing to pay up to $750 for the golf clubs, Theresa is willing to pay up to $850. The price is $575, unfortunately, there is only one set of golf clubs available at the moment! The efficient allocation of resources is when Theresa buys the golf clubs Neither Theresa nor Angela buys the golf clubs Angela buys the golf clubs No efficient allocation is possible at P = $575 because at this price quantity demanded is greater than quantity supplied. Either Theresa or Angela buys the golf clubsFor each of the following policy changes, explain why the change is or is not likely to be a Pareto improvement.1)Replacing the system of agricultural price supports with a system of income supplements for poor families.2)increasing social security benefits, financed by an increase in the payroll tax.The market for soda beverages demand is QD = 90-20P and supply is QS = 30P-10. Price is measured in dollars per one-gallon bottle and quantity in millions of one-gallon bottles a) Find the equilibrium quantity and price in the market for soda and compute Consumer Surplus and Producer Surplus when the market is in equilibrium. As that problem noted, sweetened beverages contribute to the over consumption of high-fructose corn syrup with negative consequences for public health. Suppose that each extra one-gallon bottle of soda sold in the market imposes a $1 external cost on state and federal governments that see Medicare and Medicaid diabetes-related expenditure increase. b) What is the total external cost that the soda beverages industry imposes on the government? Suppose that a $1 per bottle tax is imposed on sellers of soda beverages. What is the new equilibrium price and equilibrium quantity in the market for soda beverages? c) How much consumer surplus and how much producer surplus…
- True or False. State with reasoning: The theory of second best says that if there is a distortion that cannot be removed from the market, then it is never best to get all other variables to the Pareto efficient allocation.For an exhaustible resource A. The dynamically efficient allocation is consistent with equalizing the marginal benefits of extracting the resource to the marginal costs of extraction over time B. All market failures we discussed resulted in exhaustible resources being extracted faster than is socially optimal C. The ending price, after extraction is equal, is the minimum of something called a choke price and the price of a substitute D. The choke price can never be infinite if MC of extraction are positive..Ab 56 Economics Suppose the market demand for a lb. of organic butter is: Q=50-2.5P D and suppose the (competitive) market supply for organic butter is Q = 10P - 20 S What is the equilibrium quantity?
