Use the following information Waxman of California and Markey of Massachusetts proposed a law to limit greenhouse gas emissions from electricity generation and require electricity producers to generate a minimum percentage of power using renewable fuels, with some rights to emit to be auctioned. the congressional budget office estimated that the government would receive $846 billion from auctions and would spend $821 billion on incentive programs and compensation for higher energy prices. Electricity producers would spend $208 million a year to comply with the new rules.

1. Would the Waxman-Markey law achieve production efficiency?

2. Is the $846 billion that electricity producers would pay for the right to emit greenhouse gasses part of the opportunity cost of producing electricity?

3. Is the $821 billion that the government would spend on incentive programs and compensation for higher energy prices part of the opportunity cost of producing electricity?

4. Is the $208 million that electricity producers will spend to comply with the new rules part of the opportunity cost of producing electricity?

5. The people of Foodland have 40 hours of labor a day to bake pizza and bread. table 1 shows the maximum quantity of either pizza or bread that Foodland can bake with different quantities of labor. can Foodland produce 30 pizzas and 30 loaves of bread a day? if it can, is this output efficient, do the people of Foodland face a tradeoff, and what is the opportunity cost of producing an additional pizza? table1 labor (hours) pizzas bread (loaves) 0 0 or 0 10 30 or 10 20 50 or 20 30 60 or 30 40 65 or 40 use table 2, which shows a farm’s production possibilities, to work problems 6 and 7. Table 2 soybean (bushels per year) chicken (pounds per year) 500 and 0 400 and 300 200 and 500 0 and 400

6. If the farm uses its resources efficiently, what is the opportunity cost of an increase in chicken production from 300 pounds to 500 pounds a year? explain your answer.

7. If the farm adopted a new technology, which allows it to use fewer resources to fatten chickens, explain how the farm’s production possibilities will change. explain how the opportunity cost of producing a bushel of soybean will be affected.

8. In an hour, sue can produce 40 caps or 4 jackets and Tessa can produce 80 caps or 4 jackets. Who has a comparative advantage in producing caps? If sue and Tessa specialize and trade, who will gain? use the following information to work problems 9 to 11. cheap broad band’s a winner inexpensive broadband access has created a new generation of television producers and the internet is their native medium. source: the new York times, December 2, 2007

9. How has inexpensive broadband changed the production possibilities of video entertainment and other goods and services?

10. Sketch a PPF for video entertainment and other goods and services before broadband.

11. Explain how the arrival of inexpensive broadband has changed the PPF.