MICROECONOMICS LL W CONNECT 21E
21st Edition
ISBN: 9781307215328
Author: McConnell
Publisher: MCG/CREATE
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Chapter 5, Problem 1RQ
To determine
Relevance of punishment and regulation.
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If the tax code exempts the first $20,000 of income from taxation and then taxes 25 percent of all income above that level, then a person who earns percent and a marginal tax rate of $50,000 has an average tax rate of percent.
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O 15, 25 O 25, 15 O 25, 30 O 30, 25
Complete the accompanying table and answer the accompanying questions. (L01, LO6, LO7)
a. At what level of the control variable are net benefits maximized?
b. What is the relation between marginal benefit and marginal cost at this levelof the variable?
Control Variable Q
Total Benefits B(Q)
Total Cost C(Q)
Net Benefits N(Q)
Marginal Benefit MB(Q)
Marginal Cost MC(Q)
Marginal Cost MC(Q)
100
1200
950
Ā
Ā
Ā
60
101
1400
Ā
Ā
Ā
Ā
70
102
1590
Ā
Ā
Ā
Ā
80
103
1770
Ā
Ā
Ā
Ā
90
104
1940
Ā
Ā
Ā
Ā
100
105
2100
Ā
Ā
Ā
Ā
110
106
2250
Ā
Ā
Ā
Ā
120
107
2390
Ā
Ā
Ā
Ā
130
108
2520
Ā
Ā
Ā
Ā
140
109
2640
Ā
Ā
Ā
Ā
150
110
2750
Ā
Ā
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Ā
160
Newfoundlandās fishing industry has recently declined sharply due to overfish- ing, even though fishing companies were supposedly bound by a quota agree- ment. If all fishermen had abided by the agreement, yields could have been maintained at high levels. LO4
Model this situation as a prisonerās dilemma in which the players are Company A and Company B and the strategies are to keep the quota and break the quota. Include appropriate payoffs in the matrix. Explain why overfishing is inevitable in the absence of effective enforcement of the quota agreement.
Provide another environmental example of a prisonerās dilemma.
In many potential prisonerās dilemmas, a way out of the dilemma for a would-be cooperator is to make reliable character judgments about the trustworthiness of potential partners. Explain why this solution is not avail-
able in many situations involving degradation of the environment.
Chapter 5 Solutions
MICROECONOMICS LL W CONNECT 21E
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