Saturday
April 19, 2014

Homework Help: Economic - Cost and benefit analysis

Posted by zhuie on Tuesday, September 2, 2008 at 10:21pm.

i am not a spoon feeder, i just dont have any idea about these messy questions.

ASSIGNMENT 5: DUE 4.00PM, 4/09/08
1. A competitive firm uses coal to generate electricity. Its supply curve is Q = 300P
- 1000, where Q is quantity produced (units of electricity per year), and P is
market price of electricity per unit. The production of each unit of electricity
results in a tonne of sulphur dioxide emissions which is estimated to cost the
economy $31. If the market price of electricity is $45 per unit, what is the
optimal level of output from the viewpoint of:
a. The firm? [2 marks]
b. The economy as a whole? [2 marks]
c. If the firm is producing the economy¡¯s optimal output level, what price
should be used to represent the value of an extra unit of output of electricity
to the economy as a whole? [2 marks]
[6 marks]
2. Assuming that shoes have a world price of US$60 a pair, that the EU has a 45%
ad valorem import duty on footwear which applies to all types of footwear and
an Italian company is proposing a project to substitute 150,000 pairs of
imported shoes by domestically produced shoes. The annual cost of the project
(operating cost plus annual equivalent capital cost) at both market and
efficiency prices are $9.4 millions. Apart from the tariff there are no other
distortions to the EU domestic price of shoes. Calculate the net annual benefit
of the project:
a. At market prices. [2 marks]
b. At efficiency prices. [2 marks]

3. An ad valorem tax of 15% applies to sports shoes which have a market price
(i.e. price including the tax) of $46 per pair. What price (give the value in
dollars) should be used for a pair of sport shoes in an efficiency benefit-cost
analysis under each of the following sets of circumstances: [0.25 mark each]
a. The tax is distortionary and the commodity is a project output which
replaces existing supply;
b. The tax is distortionary and the commodity is a project output which satisfies
additional demand;
c. The tax is distortionary and the commodity is a project input which is
sourced from existing supply;
d. The tax is distortionary and the commodity is a project input which is
sourced from additional supply;
e. The tax is corrective and the commodity is a project output which replaces
existing supply;
f. The tax is corrective and the commodity is a project output which satisfies
additional demand;
g. The tax is corrective and the commodity is a project input which is sourced
from existing supply;
h. The tax is corrective and the commodity is a project input which is sourced
from additional supply
[4 marks]

Answer this Question

First Name:
School Subject:
Answer:

Related Questions

Economics~~URGENT!!! - i am not a spoon feeder, i just dont have any idea about ...
economic - ASSIGNMENT 5: DUE 4.00PM, 4/09/08 1. A competitive firm uses coal to ...
Social studies - Could you please check these other sets of terms. Here are the ...
economics - I really have to figure out the answers to these questions and i ...
U.S. Government and Politics - Describe how subjectivity and other factors ...
economics - there are just certain things that i do not understand about the ...
Microeconomics - Normative Statements - Did I explain how normative statements ...
Econ~~!! URGENT!!! - 1. A worker values her leisure at $7 per hour. If she is ...
7th grade math - Q:Sabrina is making two bird feeders in the shape of right ...
math - Ashleys class bought 3 bags of bird sees and a bird feeder for their ...

Search
Members