Economic - Cost and benefit analysis

posted by .

i am not a spoon feeder, i just don't 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]

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Econ

    For a typical negative externality market graph, with Demand curve (also labelled private value), and supply curve (private cost) and a social cost curve above the supply curve. What is the optimal quantity that maximizes total economic …
  2. economics

    there are just certain things that i do not understand about the questions...(i did read A LOT last night and i did not find anything that really answered my questions)...To be more specific... suppose a competitive market consists …
  3. Micoreconomics

    As a general rule, profit-maximizing producers in a competitive maket produce output at a point where: A) Marginal cost is increasing B) Marginal cost is decreasing C) marginal revenue is increasing D) Price is less then marginal revenue …
  4. economic

    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 …
  5. Economics~~URGENT!!!

    i am not a spoon feeder, i just don't 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 …
  6. Microeconomics [Urgent!]

    I have an exam tomorrow and I really need to know how you get the following answers. Please show me! I know it's a lot of questions, but I don't understand how you get the answer... ------------------ 40. At Nick's Bakery, the cost …
  7. Mircoeconomics

    A significant difference between monopoly and perfect competition is that: A. free entry and exit is possible in a monopolized industry but impossible in a competitive industry. B. competitive firms control market supply but monopolies …
  8. economics

    A monopoly firm is different from a competitive firm in that A. there are many substitutes for a monopolist's product while there are no substitutes for a competitive firm's product B. a monopolist's demand curve is perfectly inelastic …
  9. Science

    1. An electric space heater draws 15.0 A from a 120 V source. It is operated, on average, for 5.0h (hours) each day. a) How much power does the heater use and b) At $.10 per kWh, what does it cost to operate the heater for 30 days?
  10. economic

    find the competitive price and quantity (as if the above marginal cost curve represents the market supply curve. given the market demand equation P=100-.1Q and TC=1000+20Q+.4Q^2

More Similar Questions