Refer to the information provided in Figure 13.7 below to answer the question(s) that follow. 16 15 13.00 12.50 12 = MC ATC MR `D 800 1,000 2,000 2,500 Q Number of cable subscribers Figure 13.7 Refer to Figure 13.7. If the government regulates Armstrong Cable so they can earn only a normal return, the price would be set than if the company was not regulated. O a. $3 O b. $0.50 lower Oc. $4 lower O d. $1 higher

Refer to the information provided in Figure 13.7 below to answer the question(s) that follow. 16 15 13.00 12.50 12 = MC ATC MR `D 800 1,000 2,000 2,500 Q Number of cable subscribers Figure 13.7 Refer to Figure 13.7. If the government regulates Armstrong Cable so they can earn only a normal return, the price would be set than if the company was not regulated. O a. $3 O b. $0.50 lower Oc. $4 lower O d. $1 higher

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter25: Government And Product Markets: Antitrust And Regulation

Section: Chapter Questions

Problem 9QP

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Use the following information to answer Questions 14 – 18. Consider an industry of 2 firms with the following marginal abatement cost functions: MAC1 = 300 – 30e1 MAC2 = 500 – 20e2 [14] What is the aggregate level of emissions without regulation? [15] How much should a regulator allow each firm to emit to limit aggregate emissions to 20 tons cost-effectively? Firm 1 _____ Firm 2 ________ [16] What tax should the regulator set to achieve an aggregate emissions level of 20? [17] Calculate the total abatement cost for both firms of reaching the aggregate emissions level of 20 tons via the tax? Don’t include the tax payments. Firm 1’s Total Abatement Cost _______________ Firm 2’s Total Abatement Cost _______________ [18] Suppose you want to limit aggregate emissions to 20 tons with a competitive tradeable emissions permit system. If Firm 1 is given 5 permits and Firm 2 is given 15 permits, after trading how many permits will each firm end up with? Firm 1 _________ Firm 2 __________
The supply of and demand for tomatoes are given as:S: Quantity Supplied = -7.37 + 76.92 * PriceD: Quantity Demanded = 554.43 – 65.35 * PriceTip1: convert to inverse demand and inverse supply.The regulator considers 2 separate policies aimed to increase the consumption of tomatoes by the consumers: Policy (1): Subsidy to the producers of $1/ton produced. Policy (2): Advertisement campaign for tomatoes that results in an increase of $1.0 in the intercept of the demand function of the consumers. Tip 2: policy moves the demand function up by $1.0.a.Calculate the consumer surplus under each of the two policies.b. Calculate the producer surplus under each of the two policies.c.calculate the social surplus under each of the policies and recommend the preferred policy. Why?
Under some conditions, command-and-control pollution standards could be just as good as a cap-and-trade program at bringing about a cost-effective allocation of total abatement responsibility across firms. Furthermore, the regulator could save the cost of running a cap-and-trade program. When would this most likely be the case? a.) If firms have very different technologies, are varying sizes, and there is a mix of older and newer plants, so it is safe to assume that the firms probably have very different marginal abatement cost curves. b.) If all firms have the same types of technologies, are about the same size, and have been in production for approximately the same length of time, so it is safe to assume that each firm’s abatement costs are similar, and the regulator can issue a one-size-fits-all standard. c.) If the regulator gathers detailed information about the technologies employed by every firm so it can figure out each firm’s marginal abatement cost curve. The…
In order to evaluate the relative advantages of taxes or emissions standards in the face of asymmetric information, suppose that the regulator has an imperfect estimate but cannot exactly observe the firm's abatement cost. More precisely, suppose that the marginal abatement cost estimated by the government is MCA = 2A but the actual marginal cost is MCA = 2A+10. Moreover, suppose that the marginal benefit of abatement MBA is known by the government. Consider the following two extreme scenarios: (i) MBA is vertical at A = 30 and (ii) MBA = 60 at every A (so it is horizontal at 60). For each one of these cases, obtain the Pigouvian Tax t⁰ and the Emissions Standard A⁰ that the government would impose based on estimated abatement costs, provide graphical representations, and calculate respective deadweight losses. Can you intuitively draw some conclusion about the type of industries in which taxes are preferred to standards and vice versa.
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Suppose that a monopolist has a marginal cost of 4. Suppose that the market demand is Q(P) = 12 − 1/2P. Assuming that the monopoly maximizes its profit, what is the resulting deadweight loss?a) 25b) 0c) 5d) 14e) none of the above
A monopoly is considering selling several units of a homogeneous product as a single package. Analysts at your firm have determined that a typical consumer’s demand for the product is Qd = 130 − 0.25P, and the marginal cost of production is $160.a. Determine the optimal number of units to put in a package. units b. How much should the firm charge for this package? $
40. Consider the market for auto insurance. Insurers will gain some useful information about the riskiness of student drivers by enquiring about their academic grades. True/False
In cost plus regulation, regulators calculated the average cost of production, added in an amount for the normal rate of profit the firm should expect to earn, and set the price for consumers accordingly. In price cap regulation, the regulator sets a price that the firm can charge over the next few years. What is the problem of price cap regulation? Group of answer choices It will cause long term certainty in the market. It will not work if the price regulators set the price cap unrealistically low. It will not work if the price regulators set new prices every six months. Low level managers will have too much power.