BEA111Assignment1_V1.docx.pdf 100% + =] Question 3 - Applying Marginal Analysis (Total: 10 marks) You work far Tasmania in the public transportation department. You oversee pricing and revenue strategies for bus routes from rural communities intc Hobart. You have been studying the data from the route between Cygnet and Hobart. You know that each round trip between Hobart and Cygnet costs $100 plus S5 for each passenger. For example, a round trip with 3 passenger would cost $115 and a trip with 1 passenger would cost $105. The data from the last 6 months of service are reported in the table below. Price Per Round Trip ($) Number of Passengers per Round Trip _Revenue per Round Trip ($) 15 8 120 14 14 196 16 208 18 216 20 220 22 220 24 26 208 27 189 27 162 a. Use marginal analysis to determine the price you would set per round trip if you wanted to maximise net benefit (profit)? Explain your reasoning using marginal analysis. Show any calculations or tables you made toc determine your answer. {You only need to analyse the prices in the table) (3 marks) Of course, public transit has a positive externality associated with it. For example, the more people that use public transport the less people use their own vehicles resulting in less emissions and less congestion. What price would you set if your cbjective is to maximise the number of passengers while still covering costs. (You only need to analyse the prices in the table) (4 marks) Explain why the two prices are different. You must use marginal analysis in your explanation. (3 marks) BEA111Assignment1_V1.docx.pdf 9 / 12 100% + ... c. Explain why the two prices are different. You must use marginal analysis in your explanation. (3 marks) UNIVERSITY of 9 TASMANIA @ University of Tasmania - CRICOS PROVIDER CODE 00586B BEA111 Introduction to Markets and the Economy - Assignment 1 Question 4- Comparative Advantage and Exchange (Total: 20 Marks} Australian and Japanese workers can each produce four cars per year. An Australian worker can produce 10 tonnes of grain per year, whereas a Japanese worker can produce five tonnes of grain per year. Assume that each country has 100 million workers. a. Produce a table in your report that describes the production opportunities for an Australian and Japanese worker given the data provided in the question. The table should look like the one below. [2 marks] Cars per Year Grain per Year (tonnes) AustraliaBEA111Assignment1_V1.docx.pdf 100% + B Question 4 Comparative Advantage and Exchange (Total: 20 Marks} Australian and Japanese workers can each produce four cars per year. An Australian worker can produce 10 tonnes of grain per year, whereas a Japanese worker can produce five tonnes of grain per year. Assume that each country has 100 million workers. a. Produce a table in your report that describes the production epportunities for an Australian and Japanese worker given the data provided in the question. The table should look like the one below. {2 marks] Cars per Year Grain per Year {tonnes) Australia Japan b. Produce a table reporting the opportunity costs. The first column should have the opportunity cost of producing cars and the second column should have the opportunity cost of praducing grain. The table should look like the one below. {4 marks] Cars per Year Grain per Year (tonnes) Australia Japan c. Which country has the comparative advantage in producing cars? Which country has the comparative advantage in producing grain? Explain your answers. {4 marks] BEA111Assignment1_V1.docx.pdf 100% + (RS Which country has the comparative advantage in producing cars? Which country has the comparative advantage in producing grain? Explain your answers. {4 marks] Which country should specialise in the production of cars? Which country should specialise in the production of wheat? Explain your answers. [4 marks] g??';i% '{K of University of Tasmaniz - CRICOS PROVIDER CODE 005868 BEA111 Introduction to Markets and the Economy Assignment 1 e. Starting from a position without trade (described in part d}), give an example in which trade makes each country better off. {6 marks| BEA111Assignment1_V1.docx.pdf 100% + (HE)] Question 5 Palicies to Address Pollution (Total:15 Marks). Suppose there are two pulp and paper firms operating on the Derwent River, call them A and B. Their production currently pollutes the river, harming fisheries downstream. Each firm currently emits 5 units each pericd. A study shows that total economic surplus can be increased by reducing the total level of pollution by 6 units. The marginal cost to each of the two firms of reducing their pollution is shown in the table below. The Tasmanian government has asked you to analysis the costs of three propesed policies: (1) direct regulation; (2) tax; (3) cap and trade. Marginal Cost of Reducing Pollution ($/unit) Unit Reduced FirmA | FirmB 1 10 5 15 10 20 35 25 50 30 75 a. Direct regulation {command-and-control) involves requiring that each firm reduce their emissions by 3 units. What is the cost to each firm from this policy? What is the total cost from this policy? {2 marks} Design a tax policy that would achieve the target amount of pollution (reduce pollution by 6 units in total) at the least cost possible. What tax level would you impose? By how much does each firm reduce their pollution? What is the cost to each firm and what is the total cost? Provide an explanation for all your results. {5 marks} Design a cap-and-trade system based on pollution permits. In this policy, a firm is required to have a permit for each unit of pollution. For example, if a firm wants to produce 3 units of BEA111Assignment1_V1.docx.pdf 11 / 12 100% + ... b. Design a tax policy that would achieve the target amount of pollution (reduce pollution by 6 units in total) at the least cost possible. What tax level would you impose? By how much does each firm reduce their pollution? What is the cost to each firm and what is the total cost? Provide an explanation for all your results. (5 marks} c. Design a cap-and-trade system based on pollution permits. In this policy, a firm is required to have a permit for each unit of pollution. For example, if a firm wants to produce 3 units of pollution it most have three permits. This policy must result in a 6 unit reduction in pollution at the lowest cost possible. How many permits will be offered under this scheme? What is the cost to each firm and what is the total cost? Provide an explanation for all your results. What is the price of each permit? What is the total cost of reducing pollution under this policy? (5 marks) UNIVERSITY of TASMANIA University of Tasmania - CRICOS PROVIDER CODE 00586B 11 BEAll1 Introduction to Markets and the Economy - Assignment 1 d. Which of the three polices would you advise the Tasmanian government to implement? Be sure to support you conclusion with evidence from parts a) to c). (3 marks] Question 6- Dealing with Negative Externalities (Total: 5 Marks)BEA111Assignment1_V1.docx.pdf 100% + (HE)] {3 marks} Question 6 Dealing with Negative Externalities (Total: 5 Marks) You own a factory that emits pollution (smoke) during producticn. Assume existing laws are such that you are not allowed to emit smoke unless you get permission from the city council in which your factory is located. The relevant total costs and benefits of emitting or filtering smoke from your factory are shown in the table. Factory emits smoke Factory filters smoke Surplus for your factory $200 $160 Surplus for the city 5350 $420 Suppose you are currently negotiating with the city. Is there a deal in which your factory is permitted to emit smaoke? If so, provide the details of a deal allowing your factory to emit smoke. If a deal cannot be reached, explain why. {5 marks}