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Cynthia buys gasoline and other goods. The government considers imposing a lump-sum tax, L dollars per person, or a specic tax, t dollars per gallon. If L and t are such that either tax will raise the same amount oftax revenue from Cynthia, which tax does she prefer and why? 1.) Using the line drawing tool, draw a new budget line representing the specic tax (oft dollars per gallon). Label this line 'sz 2.) Using the threepaint curved line drawing tool, draw a new indifference curve on which Cynthia maximizes utility with the specictax. Label this curve '12: 3.) Using the paint drawing tool, indicate the new optimal consumption bundle on the new budget line. Label this point '92-. Carefully follow the instructions above, and only draw the required objects. The graph to the right shows the new budget line representing the lump-sum tax (of L dollars per person, L3), the new indifference curve on which Cynthia maximizes utility with the perperson tax (l3), and the new optimal consumption bundle on the new budget line (e3). Cynthia prefers bundle V . Click the graph, choose a tool in the palette and follow the instructions to create your graph. Other Other goods G2 G3 G1 Gasoline 6 According to a 2016 survey, 41 "/e of single, employed millennials without children would be willing to dump their partner tor a $37,000 raise. Was the survey asking a CV or an EV question? (Hint: See the Application "Compensating Variation and Equivalent Variation for Smartphones and Facebock.\") Click the icon to view the application "Compensating Variation and Equivalent Variation for Smartphones and Facebook." The survey was asking V question. an equivalent variation 3 compensating variation Click to select your answer(s). Two people trade two goods that they cannot produce. Suppose that one consumer's (consumer 1's) indifference curves ConSUMer 2 0' are bowed away from the originthe usual type of curvesbut the others (consumer 2's) are concave to consumer 2's origin. In an Edgeworth box, show that a point of tangency between the two consumers' indifference curves is not Q necessarily a Pamto-efficient bundle by identifying another allocation that Pareto dominates. The gure to the right illustrates an Edgeworth box. I2\" 1.) Use the 3-point curved line drawing tool to draw an indifference curve for consumer 1 (I1) that is convex to consumer 1's origin and an indifference curve for consumer 2 (I2) that is concave to consumer 2's origin such that the inditference curves are tangent but do not intersect and such that the point of tangency is not Pareto eicient. Properly label the lines. 2.) Use the point drawing tool to indicate the point of tangency between the two consumers' indifference curves. Label this point 'A'. Good Y 3.) Use the point drawing tool to indicate an allocation that Pareto-dominates Allocation A. Label this point '3'. Carefully follow the instructions above, and only drew the required objects. Consumer 1 500\" x Click the graph, choose a tool in the palette and follow the instructions to create your graph. Consider a market for paper, illustrated by the gure to the right. Suppose the demand for paper is D, the private marginal cost of paper production is MCp, the marginal cost of pollution, gunk, created during the paper production process is MCg. and the marginal cost of paper production to society is MCS. What is the competitive equilibrium? The competitive equilibrium price is $ and the competitive equilibrium quantity is numeric responses using integers.) tons of paper per day. {Enter lithe government were to achieve the social optimum with an emissions standard, then what would be the optimal quantity to regulate? The optimal quantity to regulate would be tons per day. Enter your answer in each of the answer boxes. Price of paper, p, $ per ton '' S o E -_.~ 388 S a 8 m a 8 O 0 3D 50 90 120 150 180 210 240 270 300 330 0. tons of paper perday \\ (Ell) Use calculus to determine whether the following utility functions imply risk aversion, risk neutrality or risk preference: a. U(W) = In(W) b. U(W) = W0.4 c. U(W) = W1.7 d. U(W) = 7W. The utility function, U(W) = In(W), implies because (as a function of W) a2 U ( W) awaw . (Properly format your expression using the tools in the palette. Hover over tools to see keyboard shortcuts. E.g., a superscript can be created with the ^ character.) The utility function, U(W) = W0.4, implies because (as a function of W) azu ( W) awaw =0. (Enter any numbers rounded to two decimal places and properly format your expression using the tools in the palette.) The utility function, U(W) = W., implies because (as a function of W) au ( W) awaw (Enter any numbers rounded to two decimal places and properly format your expression using the tools in the palette.) The utility function, U(W) = 7W, implies because 22 1 InAn Enter your answer in each of the answer boxes. ?A consumer has inverse demand of p = 15 - 1q for a good and the market price is $5.00. Calculate consumer surplus and the total value of the good for the corresponding quantity consumed. Consumer surplus is $ . (Enter your response rounded to two decimal places.) The total value is $ . (Enter your response rounded to two decimal places.) Enter your answer in each of the answer boxes
