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Ioplc: rroolem-solvlng exercuses ano snort report writing on economics QUESTION 1: 60 marks; Word Limit: 700 words The residents of a small country town are
Ioplc: rroolem-solvlng exercuses ano snort report writing on economics QUESTION 1: 60 marks; Word Limit: 700 words The residents of a small country town are worried about the environmental impact of the paper manufacturing plant located five kilometres away from the residential area. They do not want the factory closed because it employs 80% of the town's male population who are unskilled. The Local Council wants advice on how to keep the factoring operating with minimal negative environmental impact. As an economist working with the council, you have found that the inverse demand curve for paper is P : 200 Q, the marginal private cost (unregulated competitive market supply} is MCp = 80 + Q, and the marginal harm from paper-dust (pollution) is MICd = Q. Provide a short report to the council by answering the following questions. a. What is the unregulated competitive equilibrium? b. What is the social optimum? c. What specific tax (per unit output or paper-dust) results in the social optimum? d. Suppose the paper producer becomes the sole supplier. What is the unregulated monopoly equilibrium? e. If the monopoly in part (d) decides to maximize total revenue, what would be the unregulated monopoly equilibrium? f. Given the insights gained from answers to parts a-e, advice the Local Council on how to keep the paper factory running with sustainable social impact. QUESTION 2:40 marks. Word Limit: A short Word limit: 500 words. The government is has commissioned your consultancy to supply the necessary data required to formulate an income support policy for retirees. The consultancy has assigned you, their senior economist, to work on the project. You have decided that knowing the income elasticities of retirees is important and, as a result, has identified Judy as a representative retiree. Last year, Judy's income increased from $10 000 to $12 000. Judy purchased 11 concert tickets this year, compared with 10 tickets last year. Judy consumer instant noodles on 190 occasions this year, compared with 200 times last year. Write a short report containing the information the Local Council wants by answering the questions below. a. Calculate Judy's income elasticity of demand for both concert tickets and instant noodles, using the arc elasticity concept. b. Suppose that in addition, you know that the prices of both concert tickets and instant noodles have risen over the last year. What could you say about Judy's income elasticity of demand for each of these products in this case? c. Suppose that there has been no change in the price of instant noodles over the last year, but the price of instant curry flavoured rice has risen. What could you say about Judy's income elasticity of demand for instant noodles? Make sure you answer BOTH questions. You MUST read and check the assignment before submitting. Total mark will be scaled to a mark out of 20
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