Exploring Economics
8th Edition
ISBN: 9781544336312
Author: Sexton
Publisher: Cengage
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Chapter 8, Problem 9P
To determine
(a)
To explain:
The reason behind wearing a suit is a weaker signal of ability than the educational achievement.
To determine
(b)
To explain:
The reason behind some majors in colleges provide more powerful signals for future employment.
To determine
(c)
To explain:
The reason behind a double majoring provides a more powerful market signal that having a single major.
To determine
(d)
To explain:
The reason for students can be said to overinvest in grades than in learning course material
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3. Consider the market for paper. The process of producing paper creates pollution. Assume that
the marginal damage function for pollution is given by:
MDF = 3E
where damages are measured in dollars and E is the level of emissions. Assume further that the
function describing the marginal abatement cost of emissions is given by
MAC 120-E
where benefits are measured in dollars and E is the level of emissions.
a. Graph the marginal damage function (MDF) and the marginal abatement cost function
(MAC).
b. What is the unregulated level of emissions Eu? What is the social welfare of this emissions
level?
c. Assume an existing emission quota limits emissions to E = 60. Show on the graph why this
policy is inefficient. What is the deadweight loss caused by this policy?
show written calculation for B
Problem 1:
1. If a stock is expected to pay an annual dividend of $20 forever, what is the approximate
present value of the stock, given that the discount rate is 5%?
2. If a stock is expected to pay an annual dividend of $20 forever, what is the approximate
present value of the stock, given that the discount rate is 8%?
3. If a stock is expected to pay an annual dividend of $20 this year, what is the approximate
present value of the stock, given that the discount rate is 8% and dividends are expected to
grow at a rate of 2% per year?
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