Why CRS - Constant Returns on Scale would generate (1) No profit-maximizing production plan; the only nontrivial production plan involves zero profits. (2) Even when a profit-maximizing plan exists, it is not unique?
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Why CRS - Constant Returns on Scale would generate (1) No profit-maximizing
production plan; the only nontrivial production plan involves zero profits. (2) Even when a
profit-maximizing plan exists, it is not unique?
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- No written by hand solution Suppose market demand and market supply are given by the equations: QD = 40 - P QS = P - 4 Refer to the above scenario. Suppose a reduction in input prices shifts the market supply curve to QS = P. By how much does total producer surplus increase as a result of this supply shift?Draw a theoretical inverted abatement cost curve when the Marginal Rate of Transformation is constant. Remember to label your axes38. Assuming a $7 per unit tax is imposed for the sole purpose of funding a specific government program to provide free economics education to all citizens, the true total cost of this program will be $______. a) 10 b) 12 c) 14 d) 16 e) 19 f) 28 g) 36 h) 48 i) 66 j) 70 k) 84
- A local college is deciding whether to conduct a campus beautification initiative that would involve various projects, such as planting trees and remodeling buildings, to make the campus more aesthetically pleasing. For the students of the college, the visual appearance of the campus isnonrival andnonexcludable . Thus, the visual appearance would be classified as a public good. Suppose the college administrators estimate that the beautification initiative will cost $61,110. To decide whether the initiative should be undertaken, administrators conduct a survey of the college's 2,240 students, asking each of them their willingness to pay for the beautification project. The average willingness to pay, as revealed by the survey, is $20. The benefit of the beautification initiative, as suggested by the survey, is . Because the estimated benefit is than the cost, the college administrators undertake the beautification initiative. The calculation of the benefit of…1 Dynamic Efficiency: Optimal resource allocation in a two-period problem The demand for a non-renewable resource is given by: MB = 10 – 0.5Q. The marginal cost of extraction is $2 per unit (MC = 2). Therefore, the Marginal Net Benefits Function (MB-MC) is given by MNB = 8-0.5Q Answer the following question: What is the condition that determines inter-temporal efficiency?Consider a non-renewable natural resource with a per period demand curve of P=40-.5q and amarginal cost of extraction of 4. Use this information to answer the following questions about the two-period model.a. If we have a 25% discount rate and 150 total units of natural resources, what is the optimal amount ofextraction in each period?b. What are the net benefits of extraction in each period? (Hint: Consider total net benefits, not justmarginal net benefits. It will be helpful to draw a graph.)c. Now imagine we have a 0% discount rate and 100 total units of natural resources. What is thedynamically efficient amount of extraction in each period?d. If the discount rate increases to 20%, but we still have 100 total units of natural resources, what is thedynamically efficient amount of extraction in each period.e. Graph the extraction quantities here on 3 axes, with the per period quantities on the horizontal.
- A town is endowed with an oil reserve. The total stock of oil from the reserve is 110 barrels. The townmust sell all 110 barrels within two time periods, so the quantity extracted will be q1 + q2 = 110, whereq1, for example, is the quantity extracted in period 1. The price per barrel that the town can sell theoil for is pt= 150 −10/11 qt in each period. There is a constant cost of extraction c = 50, such that theresource rent earned by each barrel in each period is πt= pt−c. If the interest rate is 20%, how muchoil will the town extract in period 1 and in period 2 (what should q1 and q2 be) if it wanted to extractefficiently (i.e. maximize profits)?Discuss 5 barriers to effective project planning in ZimbabweMany states are now imposing severance taxes on resources being extracted within their borders. How is an increasing marginal extraction cost (over time) of depeletable resource by the imposition of severance taxes compared to the case without taxes? A. Marginal extraction cost increases due to the imposition of severance taxes B. Marginal extraction cost decreases due to the imposition of severance taxes C. Marginal extraction cost with severance taxes stays the same as the case without taxes
- Suppose a tax is set at t’ in the figure. How many units of emissions are ABATED and is abatement achieved cost effectively? Suppose a regulation has just been implemented requiring that coal-fired power plants pay a tax of $80 on each unit of emissions (1 unit is 1 metric ton). Before the tax was imposed, a plant called Old River Power had an emissions level of 100 units. Given a marginal abatement cost function of 200 – 2E, under the tax policy what will Old River Power pay the regulator in emissions taxes?Assume that the oil extraction company needs to extract Q units of oil (a depletable resource) reserve between two periods in a dynamically efficient manner. What should be a maximum amount of Q so that the entire oil reserve is extracted only during the 1st period if (a) the marginal willingness to pay for oil in each period is given by P = 34 - 0.2q, (b) marginal cost of extraction is constant at $3 per unit, and (c) discount rate is 2%?Given that the marginal cost of a ‘backstop’ (e.g. solar energy) is MCb per unit of an exhaustible resource, prove that the cost of the ‘backstop’ sets an upper limit on oil price and also determines the initial price of oil. (Hint:Utilize the expression pt = MC + (p0 − MC)(1 + r)t and consider T as theswitch date.)