The government wishes for Alonso to buy fewer sport cars because they create too much pollution. The government decides to place a tax on the price of sport cars. How large does 7 need to be so that Alonso buys half of his original number of sport cars? What is Alonso's new utility under the tax? T= 2, V = 450 T= 2, V = 400 T = 1.5, V = 350 T = 1, V = 500

The government wishes for Alonso to buy fewer sport cars because they create too much pollution. The government decides to place a tax on the price of sport cars. How large does 7 need to be so that Alonso buys half of his original number of sport cars? What is Alonso's new utility under the tax? T= 2, V = 450 T= 2, V = 400 T = 1.5, V = 350 T = 1, V = 500

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

100%

IMPORTANT: Pc=2 , Pp=4 , I=80

The government wishes for Alonso to buy fewer sport cars because they create too much pollution.
The government decides to place a tax 7 on the price of sport cars. How large does T need to be so
that Alonso buys half of his original number of sport cars? What is Alonso's new utility under the
tax?
O T = 2, V = 450
OT=2, V = 400
O T = 1.5, V = 350
OT=1, V = 500

Alonso has preferences for sport cars (C) and paella (P) given by the utility function
U(C, P) =
= 4CP. The prices for C and P are, respectively, pc and pp. In what
follows, do not worry if the results are not integers.

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