Public Economics

1. Suppose there are only two people, Simon and Charity, who mush split a fixed income of 4100. For Simon, the marginal utility of income is MUs=400-2Is. While for Charity, marginal utility is MUc=400-6Ic, where Ic, Is are the amounts of income to Charity and Simon, respectively. a). What is the optimal distribution of income if the social welfare function is additive? b). What is the optimal distribution if society values only the utility of Charity? What if the reverse is true? Comment on your answer. c). Finally, comment on how your answers change if the marginal utility of income for both Simon and Charity is constant: MUc=400 MUs=400 2. Consider Eleanor, who qualifies for th... click for more

Stability

How will investors assess the stability of Strident Marks? What are the key financial ratios that measure the stability of an organization? Define stability.

Effects of differential taxation of inputs. How deadweight loss affects economic growth.

1. In 2003, Hong Kong levied a tax of $51 per month on employers of domestic helpers from other nations. Many of these workers were from the Philippines, and President Arroyo of that country called the tax "unjust and unfair". Given that the tax was levied on employers, was President Arroyo correct in being disturbed? Sketch a model that is consistent with her concerns being justified. 3. Some countries rely relatively heavily on taxes that distort economic behavior, and other do not. A recent econometric study found that countries in the latter category tend to grow faster than countries in the former. Use the discussion surrounding Figure 13.9 to explain this phenomenon. (The tit... click for more

Multiple Choice - The government is hoping to reduce the amount of pollution in the Chesapeake Bay and determines that two firms are responsible

1. The government is hoping to reduce the amount of pollution in the Chesapeake Bay and determines that two firms are responsible for this pollution. For firm 1 the costs of pollution reduction are equal to 2X1 whereas for firm 2 they are constant and equal to 80. a) Graph the industry-level marginal cost curve. b) Which firm is reducing pollution in each range of pollution reduction x=x1+x2? c) Suppose that the benefits of pollution reduction are equal to 180-x (with x=x1+x2). Solve for the socially efficient outcome. d) Compare the total costs and benefits of achieving this outcome. 2. Assume that there are two firms in a local area that emit nitrous oxide into the atmosphere. Given... click for more

Social efficiency required to reduce pollution

Two firms are ordered by the federal government to reduce their pollution levels. Firm A’s marginal costs associated with pollution reduction is MC=20+4Q and firm B’s MC=10+8Q. The marginal benefit of pollution reduction is MB=400-4Q. Compare the social efficiency of three possible outcomes: require all firms to reduce pollution by the same amount; charge a common tax per unit of pollution; or require all firms to reduce pollution by the same amount, but allow pollution permits to be bought and sold.