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A group of researchers has estimated the marginal social benefits of improvements in soil fertility per acre to be: P = -1.25Q +20 The government is considering options for supporting farmers to improve soil fertility. The government can set a fee of either $7.50, $5, $2.00 or $0 on nitrogen fertilizers. The marginal cost of providing the program is constant at $5 per acre.
• What is
• What is the government revenue under each pricing scenario?
• What is the cost to the government under each pricing scenario?
• What is the government (producer) surplus under each of the pricing options?
• What options maximize total social benefits? Explain your answer.
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- The market for smart phone applications is characterized by the following demand and supply curves. QD = D(P) = 15 - 3P QS = S(P) = 5 + 10P (a) Calculate the equilibrium price and quantity for this market. (b) The government is considering introducing a per unit subsidy of t on each electric car that is purchased. Suppose that the statutory incidence of this subsidy will be on buyers. Using the equilibrium conditions, D(Pn - t) = S(Pn) = Q* (i.e. that demand equals supply in equilibrium), derive an equation in terms of es and ed that describes what fraction of the subsidy is borne by buyers/consumers. (c) Suppose that the unit tax is set at t = 0.1 per unit. What is the excess burden of this tax per dollar of revenue raised? (d) Suppose that we incorrectly assumed that supply was perfectly elastic and there was no impact of the tax on the equilibrium price received by sellers. Would EB/Tax Revenue be higher or lower than what you calculated in part (c)? In 4 sentences, explain your…The local government has decided that because children's health has large external benefits, it will offer a subsidy to help families pay for visits to the pediatrician. However, the government isn't sure at what level to set the subsidy. The figure below shows the current demand curve for pediatricians' visits (D₁), and three alternative subsidies, represented by curves D2, D3. and D4- Price (S) 240 220- 200- 180- 160- 140- 120- 80- 60- 40- 20- 0 Quantity of pediatrician visits D₂ reset D₂ D₂ 50 100 150 200 250 300 350 400 450 500 D₁ D₂ a. Assume that the correct level of subsidy is D3. Compared to the efficient outcome, graph the loss in total surplus that would result from subsidies D₂ and D4 Instructions: Use the tools provided (D₂ and D4) to draw the loss in total surplus for each subsidy. b. The socially optimal level of pediatrician visits is 350 visits.Corn is a very valuable product for which the U.S. government routinely offers subsidies. With no price support, the equilibrium price for corn is $300 per ton and the equilibrium quantity is 500 million tons per year. Suppose that the government agrees to pay farmers $350 for every ton of corn they produce and can't sell in the market. According to the farmer's market supply curve, 600 million tons per year is supplied at the price of $350 a ton, so production should increase to this amount. However, domestic users of corn cut back their purchases. Only 450 million tons a year is demanded at the price of $350 a ton, and purchases decrease to this amount. Farmers continue to produce 500 million tons of corn per year, so because they produce a greater quantity of corn than domestic buyers are willing to purchase, something must be done with the surplus. To make the price support work, the government decides to buy the surplus. a. In this example, how many million tons does the…
- The market demand for bicycle helmets is given by D(P) = 90−4P and the market supply ischaracterized by S(P) =P−10. In both expressions, P is the price per unit. The government introduces a per unit subsidy of S per helmet, that is paid out to the producer for each sale of helmets. (a) What is the equilibrium price and quantity before the government intervenes in the market? (b) What is the equilibrium price and quantity after the government intervenes in the marketimposing a per subsidy S >0? Hint: You have to find the equilibrium for all relevant levels of S. (c) Calculate changes in consumer surplus, producer surplus and welfare, as a function of subsidy S, due to the introduction of the subsidy. What welfare conclusion(s) do you draw? Illustrate graphically.Read the following scenario. Corn is a very valuable product for which the U.S. government routinely offers subsidies. With no price support, the equilibrium price for corn is $300 per ton and the equilibrium quantity is 500 million tons per year. Suppose that the government agrees to pay farmers $350 for every ton of corn they produce and can't sell in the market. According to the farmer's market supply curve, 600 million tons per year is supplied at the price of $350 a ton, so production should increase to this amount. However, domestic users of corn cut back their purchases. Only 450 million tons a year is demanded at the price of $350 a ton, and purchases decrease to this amount. Farmers continue to produce 500 million tons of corn per year, so because they produce a greater quantity of corn than domestic buyers are willing to purchase, something must be done with the surplus. To make the price support work, the government decides to buy the surplus. Step 2 Use the scenario to…The government decides to place a £25 per unit-subsidy on the sales of books. The initial demand and supply curves for books in this country are respectively: Qd = 1000 – 2*P and Qs = 3*P + 500 where price in measured in Great British Pounds per book. a) What is the pre-subsidy equilibrium price and equilibrium quantity of books? Illustrate demand and supply curves and the market equilibrium in a diagram indicating the respective intercepts. What are Consumer and Producer Surplus in this market? b) How many books will be traded once the £25 subsidy is enacted? How much will consumers pay per book? Illustrate the effects of the subsidy on the equilibrium quantity and price of books in a diagram (you can use the diagram drawn in part a)). What are Consumer and Producer Surplus in this market with the subsidy in place c) What is the change in consumer and producer surplus following the introduction of this subsidy? Calculate the monetary value of these changes and identify the respective…
- The local government has decided that because children's health has large external benefits, it will offer a subsidy to help families pay for visits to the pediatrician. However, the government isn't sure at what level to set the subsidy. The figure below shows the current demand curve for pediatricians' visits (D1), and three alternative subsidies, represented by curves D2, D3 and D4. a. Assume that the correct level of subsidy is D3. Compared to the efficient outcome, graph the loss in total surplus that would result from subsidies D2 and D4. b. The socially optimal level of pediatrician visits is __ visits.A steel mill, S, produces 20 tons of water pollution for every 100 tons of steel it produces. The downstream village of Watertown (WT) spends $150 per ton of water pollution from S to eliminate itsenvironmental harm. S is a price taker in an international market where the demand for steel is p = 100 – 3X and the market supply of steel is p = 40 + 3X. X is in units of one (1) million tons per day and p is the price in dollars per ton of steel. S has a daily increasing marginal cost of production function, MC = x.S's Total Cost function = x*x/2 where x is S’s daily output.(a) If S has no legal liability for its pollution, what is S’s daily production of steel?How does your answer here relate to the concept of private efficiency?(b) WT wants to bargain with S to reach an optimal agreement on this pollution. Assuming S is still not legally liable for its pollution and both S and WT do not use lawyers, would there be an agreement? How does your answer here relate the concept of private…The demand and supply for taxi cab Rides are given as follows; QD = 600 + pO - pR and QS = 200 – pO + pR Where pR is the price of a taxi ride, and pO is the price of oil. As you see, both the demand and the supply of taxi cab rides are affected by the price of oil, pO. Assume that pO < 3. (a) For a given pO, derive the equilibrium price and quantity for the taxi rides (both the price and/or quantity might depend on pO, naturally). Does the equilibrium price for rides increase/decrease/stay the same as the price oil increases? Does the equilibrium quantity of rides increase/decrease/stay the same as the price oil increases? (b) (Conceptually rather hard!) Consider the equilibrium above, as a function of the given oil price, pO. As the oil gets more expensive, what happens to the price elasticity of demand AT THE EQUILIBRIUM point?
- Due to the decrease in the level of water in the lakes of Chapel Hill, the local government wants to reduce the consumption of tap water. They are evaluating two alternatives: to impose a minimum price per gallon of tap water consumed that is five cents greater than the actual price, or to impose an excise tax of five cents on consumption of tap water. Assume that this market is originally in equilibrium. Which of these two alternatives will deliver a bigger reduction in the quantity consumed? Why? Use graphs to explain your answer. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.The local government has decided that because children's health has large external benefits, it will offer a subsidy to help familles pay for visits to the pediatrician. However, the government Isn't sure at what level to set the subsidy. The figure below shows the current demand curve for pediatricians' visits (D), and three alternative subsidies, represented by curves D2, D3, and D4. 0 Price (5) 240 220 200 180 160 140 120 100 80 60 40 20 D 50 100 150 200 250 300 350 400 450 500 Quantity of pediatrician visits Tools A Da O (A) D₂ a. Assume that the correct level of subsidy is D3. Compared to the efficient outcome, graph the loss in total surplus that would result from subsidies D₂ and D4- Instructions: Use the tools provided (D₂ and Da) to draw the loss in total surplus for each subsidy b. The socially optimal level of pediatrician visits is visits,Consider that the market for soybeans is defined by the following demand and supply equations: QD = 200 - 10P and QS = 20P - 100, where P is the price in dollars and Q measures the quantity in tons per quarter. The market is currently in equilibrium. Now consider that after much lobbying by the United Farmers Association, the government imposes a price control of $12.50 in this market, with no additional government support. 1.Given the current market environment, what is the total surplus in the market? 2.Describe the current market outcome. As the result of the government’s policy, the current market outcome is __________(efficient ? not efficient?). The quantity traded is __________(less than ? greater than ?) the quantity traded before the government intervention, and price sellers ( farmers) receive per ton is __________(equal to 10? equal to 12.50? less than 10? less than 12.50 and greater than 10?). Additionally, as a result of the government’s policy sellers seem to be…