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. The house near a forest is priced higher than comparable houses due to the better air quality. The higher house price reflects which component of the economic value of forest? Briefly explain how you reach your answer (5 points)
2. Determine the amount of producer surplus generated in each of the following situations. $0 a. Gordon lists his old Lionel electric trains on eBay. He sets a minimum acceptable price, known as his reserve price, of $75. After five days of bidding, the final high bid is exactly $75. He accepts the bid. $ b. So-Hee advertises her car for sale in the used-car section of the student newspaper for $2,000, but she is willing to sell the car for any price higher than $1,500. The best offer she gets is $1,200, which she declines. c. Sanjay likes his job so much that he would be willing to do it for free. However, his annual salary is $80,000. $ 80000
1
In this case the higher house prices , reflects air pollution component of the economic value of forest.
- Air pollution can affect the economy in numerous structures, for example, higher paces of asthma, diabetes or incessant respiratory infections prompting diminished capacity to work and lower interest rates in the work power.
- Youngsters defenseless to asthma assaults additionally miss school days, affecting their learning while human services necessities can bring about their watchmen likewise taking additional time off work. As per the report, handicap from ceaseless sicknesses cost the world's economy $200 billion of every 2018, with debilitated leave and preterm births costing $100 billion and $90 billion separately.
- Therefore it is very much possible that people will be willing to pay a higher price for house which is free from air pollution. Air pollution also has very severe impact on the economy of a country.
- The all out yearly expense of air pollution in China is assessed to be $900 billion every year with costs in the U.S. rushing to $600 billion every year. Indian urban areas have scored negatively in air pollution files for a considerable length of time and the issue costs the nation $150 billion every year by and large.
- In 2018, the expense of filthy air likened to 6.6 percent of Chinese GDP, 5.4 percent of India's GDP and 3 percent of U.S. GDP.
2
Ans:
a)
Producer surplus = 0
Gordon will receive no producer surplus since the price received for the trains is equal to his cost.
Explanation
Producer surplus is the difference between the price producers are willing to supply the product for and the price they actually receive from consumers. Gordon will receive no producer surplus since the price received for the trains is equal to his cost.
Producer surplus = price producers are willing to supply - price they actually receive from consumers.
= $75-$75
= 0
b)
No producer surplus is created
Explanation
Producer surplus is the difference between the price producers are willing to supply the product for and the price they actually receive from consumers.
No trade takes place because So-Hee's cost is $1,500, which is higher than the price of $1,200 she is offered. So no producer surplus is created.
c)
Producer surplus = $80,000
Explanation
Sanjay's cost is zero. The price he is paid for his job is $80,000, so his producer surplus is $80,000.
