Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Consider a market for tertiary education. Suppose the Government is considering implementing a price ceiling on the tuition paid by students. As a CBA analyst

image text in transcribed
image text in transcribed
Consider a market for tertiary education. Suppose the Government is considering implementing a price ceiling on the tuition paid by students. As a CBA analyst you have collected the following information: The marginal cost curve is MC = 200 + 2Q The marginal private benefit curve is MPB = 3000- 2Q The marginal external benefit curve is MEB = 1400 + 0.5Q a) Use the information above find, determine the following: i) The equilibrium before any market intervention is ? ii) Assuming the price ceiling is set at P = $600, the equilibrium after the price ceiling ? In your spreadsheet, note what has happened to the price and quantity traded on the market. Illustrate graphically, by hand. b) Instead of implementing only a price ceiling, the government also plans to provide taxpayer supported placements. In this instance, the government will pay the difference between the student contribution and the marginal cost to tertiary institutions to correct the market failure. Illustrate graphically the result of the interventions, by hand and identify: i) The equilibrium after the taxpayer supported placements is ? ii) The consumer surplus before any intervention and after the interventions in part alii) and b). The change in consumer surplus from the intervention is ? iii) The producer surplus before any intervention and after the interventions in part alii) and b). The change in producer surplus from the intervention is ? iv) The government expenditure is ? v) The gain to local communities is ? vi) The deadweight loss eliminated by the price support is

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introduction to Global Business Understanding the International Environment & Global Business Functi

Authors: Julian Gaspar, James Kolari, Richard Hise, Leonard Bierman, L. Smith, Antonio Arreola Risa

2nd edition

1305501187, 9780547152127, 547152124, 9781111824259, 1111824258, 978-1305501188

More Books

Students also viewed these Economics questions

Question

6. How can a message directly influence the interpreter?

Answered: 1 week ago