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1)Government consider four policies: 1 1
1)Government consider four policies: 1 1. A minimum legal price at $35. 2- A maximum quantity sold at 25 cigarettes per day. 3- A $4 tax on selling 4- A $2 tax on consumption e. Which policy causes the smallest quantity sold? f. Which policy causes the smallest deadweight loss? g. Which policy is better for consumers in term of consumer surplus? h. Which policy is better for producers in term of producer surplus? i. Which policy causes the highest revenue for the government? j. *Which policy do you suggest?
2)
Choose a program or service that is provided by an international organization.
1. Tell us what program or service you chose.
2. Does your example fit the definition of a rival good? Explain why or why not.
3. Does your example fit the definition of an excludable good? Explain why or why not.
3)
Katie likes to paint and sit in the sun. Her utility function is U(P,S)=3PS + 6P, where P is the number of paint brushes and S is the number of straw hats. The price of a paint brush is $I and the price of a straw hat is $5. Katie has $50 to spend on paint brushes and straw hats.
- State the objective function
- State the constraint
- Solve for MUP and MUS and state if utility function exhibits diminishing MU for each good diminishing MU
- Interpret the value of your MUP and MUS at P=2 and S=1
- Solve for MRSPS and state if the utility function exhibits diminishing MRS
- Interpret the value of your MRSPS if P=2 and S=1
- Write down the optimality condition. Express it using the utility function and prices given above.
- What is the economic meaning of the optimality condition applied specifically to the goods straw hats and paintbrushes. Equality of slopes of IC and BL are not acceptable answers- these are not economically relevant terms
- Solve for optimal level of straw hats and paintbrushes.
- Draw your optimal solution by drawing an IC (convex one) and BL, and make sure you label your optimal levels of B and C as well as the intercepts of your BL.
Expert Solution
1)According to the policies provided, if $35 is the minimum legal price then there would be no deadweight loss or consumer surplus.
Assuming $35 is the maximum legal price.
Answers below are solved according to the assumption.
e)Policy A
According to the chart provided we see 2 conditions of lowest sale. Policy A and D.
Zero supply or demand both causes lowest sale.
According to the Government policies, the maximum legal price is $35, so policy D of $40 cannot be applied.
Hence policy A has the lowest sale.
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f) Given maximum legal price is $35,
Maximum price of cigarettes sold legally is $30.
So lowest dead weight loss is
Loss * quantity sold per day
= $(35 - 30) x 25
= $5 x 25
= $125 (Answer)
(If we take other legal prices such as 20 or 10, the difference in deadweight loss will increase, hence price 30 was considered)
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g) Policy A
We know as the price of a product decreases from equilibrium, the consumer surplus increases.
Hence, Policy A with the lowest price as $10, is the best policy for consumers, in terms of consumer surplus.
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h) Policy D
We know, as the price of the product increases from equilibrium, the producer surplus increases.
Hence, Policy D with the highest price as $40, is the best policy for producers, on terms of producers surplus.
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i) Policy B
REVENUE = Price X Quantity Demanded
Policy B has the highest revenue of $1200
(i.e., 20 x 60)
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j) Policy C
A market runs best in equilibrium, where demand meets the supply of the product.
In this case, we see none of the policies meet demand and supply.
But we can observe in policy C, the demand and supply are the nearest, hence policy C will be the best in terms of the market and economy.
2)1)The service that I have chosen is Microsoft Office Software or program which is being provided by international organization called Microsoft.
2)My example of Microsoft Office program doesn't fit in the definition of rival good because a rival good is a kind of good that may be used by a single user or if being used by one person will reduce the availability of others to consume. But Microsoft Office Program can be used by multiple peoples based on licensing agreement and it won't decrease based on the use of one person. So it doesn't fall under the category of rival good.
3)Yes, Microsoft Office program falls under the category of excludable good because excludable good are the types of good where producers can prevent some people from accessing it based on their ability and willingness to pay for the product. Same is being true for Microsoft Office Program, people cannot use it before paying the service chanrges.
3)Please use this google drive link to download the answer file.
https://drive.google.com/file/d/1kavNBvT35WiNcVLcPNJShp6opW4KZJzt/view?usp=sharing
Note: If you have any trouble in viewing/downloading the answer from the given link, please use this below guide to understand the whole process.
https://helpinhomework.org/blog/how-to-obtain-answer-through-google-drive-link
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