The government wants to make sure all workers have healthcare so they are considering Institutlng a program where they tax firms $10 per worker to fund healthcare facilities for employees. Suppose the market demand curve for labor is given by D (p) = 100 p and the market supply curve of labor Is given by S (p) = p + H 10 where p is the price of labor. and H ls how much the workers value the health services when they are provided by the tax. Find the equilibrium quantity and price without the tax and without the healthcare (H = ID]. i p: Find the equilibrium with the $10 per worker tax and assuming the workers don't value the healthtare at all {H = 0). 3 || Now suppose that In addition to the tax. the potential employees value the provided healthcare at $10 {H = 10}. Find the new equllibrlum. Consider Intuitively whether and how the workers valuing the healthcare changes the deadweight loss created by the tax alone. If: '9 1| You sell homemade hot chocolate, which only needs two Ingredients: mill: and cocoa powder. The production function Is given by 1 h (m, c) = {min{m, c}) 5 .where 111 represents cups of milk. 6 represents tablespoons of cocoa powder and h represents cups of hot chocolate. One cup of milk costs 40 cents and one tablespoon of cocoa powder costs 10 cents. It Is a perfectly competitive market with each cup of hot chocolate sold at $4. Solve for the optimal cups of hot chocolate that you should make to maximize prot. t q: Apple is deciding whether or not to invest $10,000 in research and development to develop the iGlasses. If they make this investment today, they will be able to develop the iGlasses for sure and start selling them starting from next year. They will also obtain a 10 year patent on the product. Once the patent expires, copycats will leap into the market and make it perfectly competitive. Other than the research and development investment, the cost of producing iGlasses is approximately 0. Suppose that market demand for the iGlasses is p - 200 - 5q in each year. The Interest rate is 10%% and there is no inflation. Apple will. O...develop the iGlasses O..not develop the iGlasses The answer is ambiguous. Suppose that the U.S. government decreases the number of years for which a patent is valid to 5. Apple will. O-..develop the IGlasses O...not develop the iGlasses The answer is ambiguous. Following this example, how we can expect the length of patents to affect Innovation? Shorter patents will most likely increase innovation Shorter patents will most likely decrease innovationIn the US, beer and meat are the only two commodities produced and consumed. A gallon of beer requires 5 minutes of labor to produce, and a pound of meat requires 8 minutes of labor to produce. Assume that labor is the only input needed to produce beer and meat. There is a total of 123 billion hours of labor per year, and a total of 6.3 billion gallons of beer and 48 billion pounds of meat are produced each year in the US. Assume that wage is the same in the production of both goods, and the markets for the goods are both perfectly competitive. Within the US under autarky, what is the ratio of the price of meat to the price of beer? Let the ratio above be k. Suppose that on the international market, we can trade any amount of beer for meat or meat for beer, at a ratio of k gallons of beer to 1 pound of meat. For what values of / will international trade increase the welfare in the US relative to autarky? (Select each correct answer.) Ok
k None of the aboveConsider a society of 100 inhabitants composed by two types of individuals. Half of them are poor and have a yearly income of 10,000 dollars, and half of them are rich, with an annual income of 90,000 dollars, The government plans to tax annual income at a flat rate in order to redistribute it with a lump sum transfer ?" per person that is equal for all members of the society. However, for a positive tax rate of 7 over annual income, there is a 7 leak in the bucket. Thus, for each dollar of income taxed, the total tax revenue collected is equal to T - T . Assume 720. Solve in terms of 7 and ?', the total income that a poor individual has after taxes are collected and transfers are made. Solve in terms of + and I, the total income that a rich individual has after taxes are collected and transfers are made. Assuming that the government needs to balance the budget, solve the budget constraint of the government, and solve for the lump sum transfer T in terms of T. To show demonstrate that you have solved these constraints, assume for a moment that T - 0.2. Given that the government needs to balance the budget, what would be T? T - Again assuming that 7 - 0.2, what would be the total income of a poor individual? poor = Again assuming that + = 0.2, what would be the total income of a rich individual? Yrich = Now, what is the optimal tax rate 7poor that maximizes the income of a poor individual?Suppose poor households have preferences over consumption (C) and leisure (T) given by u (C, T') = In (C) + In (T'), and they can work at hourly wage wp = 5. Assume consumption costs one dollar, and they have 24 hours in a day to allocate to either leisure or working. Solve for the household's optimal bundle of consumption and leisure. C = T = How much utility do they get? u=To help the poor, the government offers an income transfer of $20, but because picking up the check takes time, participants can only work up to 5 hours per day if they sign up for the program. (Continue to assume any time not spent working is leisure.) Find their optimal bundle when the program is in effect. C = T = How much utility do they get? u=