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1) In order to reduce the harmful affects of recession and carbon emissions, the government provided tax incentives for manufacturing firm's to that provide alternative, more efficient methods of combining inputs to produce output
1) In order to reduce the harmful affects of recession and carbon emissions, the government provided tax incentives for manufacturing firm's to that provide alternative, more efficient methods of combining inputs to produce output. a. increase the returns to scale b. acquire energy efficient production technologies C. create perfect competition between firms d. maintain constant returns to scale
2)A markets demand and supply functions are as follows: Qd = 500 - P/4 , and Qs = P/2 - 100. For parts 2-5, use ONE graph.
1. Determine the equilibrium price and quantity.
2. Graph the inverse demand and supply curves with Q on the horizontal axis and P on the vertical axis. Clearly label all axes, curves, intercepts, and the equilibrium price and quantity values
3.Assume the government sets a rule that the selling price cannot go above $400. What kind of a price restriction is this? Answer with two words. Draw this price restriction on your graph in part (2) and label it.
4. Will this government restriction cause a shortage or surplus? Answer with one word. Calculate this value and show it on your graph in part (2).
5. what is the deadweight loss with the price restriction in place? Calculate this value and show this area on your graph in part (2)
Expert Solution
1)Option (b) is the correct answer. As energy efficient technology reduces gas emissions.
2)1) the equilibrium price in the market is $800 per unit and the equilibrium quantity is 300 units
2) the graph is provided below
3) if there is a restriction that the price cannot increase above $400 per unit, and that the current price is 800 Dollars per unit at equilibrium, it implies that the price of 400 dollars per unit will be acting like a price ceiling. This is because price of $400 per unit imposes the maximum limit on the market price which makes it binding
4) this causes a shortage because the quantity demanded is greater than the quantity supplied. It is worth 300 units
5) DWL = 0.5*(1600-400)*(300-100) = $120,000.
please see the attached file.
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