- Suppose that we need to develop a model to help us to allocate a resourcebetween two time periods: Period 1 and Period 2. Demand can becharacterized in both periods as: P = 20-2Q. In both periods the marginalcost of extracting the resource is constant at $4 per unit. The total quantity ofthe resource that is available to allocate between the two periods is 18 units(in other words, Q1 + Q2 <= 18). Assume that the discount rate is 5%. What isthe marginal user cost?a) 0;b) 0.76;c) -2; d) 1.9Shark

The objective of the question is to find the marginal user cost in a two-period model where the…

Answered: - Suppose that we need to develop a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. Consider the following static model. The consumer has preferences such that he always sets his consumption equal to è, where è is exogenously fixed. The consumer has h units of time that he can allocate between working hours (NS) and leisure (1). The wage per hour is w. The representative firm has a technology for producing consumption goods, given by y=zNd where z is the total factor productivity and Nd is the labor input. Denote the profit of the firm as 7. The firm belongs to the representative consumer. The government imposes proportional tax 7 (set exogenously) on the labor income of the representative consumer. The government spends the tax revenue to give lump-sum subsidy B to the representative consumer. 1). Write down the consumer's budget constraint. 2). Solve consumer's optimization problem. 3). Write down the firm's optimization problem and find î and w. 4). Write down market clearing condition for the labor market and for the goods market. 5). Write down the government…
Consider the market for a bond which has a face value of $2,000, pays a coupon of $100, and matures in 2 years. Suppose the demand for such bonds is given by P=2,900-Q, and that the original supply of such bonds is given by P=200+2Q. Suppose now that the supply of bonds is given by the equation P=500+2Q. If you bought the bond at the old equilibrium price (given the original supply curve), what would be your rate of return from selling the bond at the new equilibrium price (given the new supply curve)? .1% .05% 10% 5%
List two real-world instances in which rational function or equation is being employed. Also, state how rational function is being applied in each real-life event.
S6. Consider a simplified model in which everyone gets electricity either from solar power or from fossil fuels, which are both in relatively inelastic supply. (Ín the case of solar power, think of the required equipment as being in inelastic supply.) The upfront costs of using solar energy are high, so when the price of fossil fuels is low (that is, when few people are using fossil fuels and there is a high demand for solar equipment), the cost of solar can be prohibitive. In contrast, when many individuals are using fossil fuels, the demand for them (and thus the price) is high, whereas the demand (and thus the price) for solar energy is relatively lower. Assume the payoff table for the two types of energy consumers to be as follows: COLUMN Solar Fossil fuels Solar 2,2 3,4 ROW Fossil fuels 4,3 2,2 (a) Describe all possible ESSS of this game in terms of s, the proportion of solar users, and explain why each is either stable or unstable. (b) Suppose there are important economies of…
Compare two versions of the two-period depletable resource model that differ only in the treatment of marginal extraction cost. Assume that in the second version the constant marginal extraction cost is lower in the second period than the first (perhaps due to the anticipated arrival of a new, superior extraction technology). The constant marginal extraction cost is the same in both periods in the first version and is equal to the marginal extraction cost in the first period of the second version. In a dynamic efficient allocation, how would the extraction profile in the second version differ from the first? Would relatively more or less be allocated to the second period in the second version than in the first version? Would the marginal user cost be higher or lower in the second version? Why?C
You manage two chocolate factories. Using only these two factories, you must produce exactly 420 kgs of chocolate daily at lowest possible cost. Mathematically, you have: Q1 = Quantity produced at Chocolate Factory #1 Q2 = Quantity produced at Chocolate Factory #2 Daily total overall production: Q1 – Q2 = 420 At present, each factory produces half the overall requirement. This means that Q1 = 210, Q2 = 210 a) Following your logic , you realize that as long as the marginal cost is different between the two factories, you can lower overall cost while maintaining production at 420 kgs. So, to reduce the overall cost to the lowest possible, you decide to move more than 1 kilogram from one factory to another. As a result, each factory will produce a different quantity of chocolate while the overall daily production remains at 420 kgs. To minimize overall cost, how many kilograms will you order/instruct Factory #1 to produce? Q1 = ____________kgs And how many kilograms would you…
Suppose you have the following indirect utility function: V(Pa, Py, I) = In PxPy What are marshallian demands for x and y? I (a) (9x9y) = (22) (b) (9,9y) = (In, In 2) (c) (9, 9y) = (exp(2p/py), exp(2ppy)) I (d) (9x, gy) = (2pr+py' px+2py) What is the expenditure function for the associated expenditure minimization problem? (a) E(pa, Py, U) = (P + Py) ln(U) (b) E(pa, Py, U) = √exp(U)Papy (c) E(pa, Py, U)= (p²+p²) In(U) (d) E(pa, Py, U) = exp(U)²papy What are the individual's Hicksian demands for goods x and y? (a) (h₂, hy) = ((BU)¹/², (PU) ¹/²) (b) (ha, hy) = (RU, DU) (c) (ha, hy) = ((2 exp(U))¹/², (exp(U))¹/²) -1/2 (d) (hx, hy) = ((P₂PzU)−¹/², (P₂PzU)-¹/2) Are x and y complements or substitutes?

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