Question
In: Economics
Two flatmates Matt and Ryan are deciding how to best furnish their house. Furniture costs $100...
Two flatmates Matt and Ryan are deciding how to best furnish their house. Furniture costs $100 per unit and can be considered both non-excludable and non-rival once purchased. They have the following demand curves: Matt: P=180-15Q Ryan: P=120-10Q [8 marks]
A. Suppose that Matt and Ryan cannot come to an agreement to share the cost of furniture. What will be the deadweight loss associated with competitive market outcome? Calculate the surplus for Ryan in the competitive market outcome. [2 marks]
B. Use the Samuelson condition to determine the efficient provision of this public good. What is the socially optimal price and quantity? [2 marks] Knowing that Ryan is going to free ride of his provision for furniture Matt decides it would be better to just move in elsewhere. So, Liam decides to move in with Ryan instead. Liam has exactly the same individual demand curve as Ryan. Page 10 of 11
C. Suppose that Liam and Ryan cannot come to an agreement to share the cost of the furniture. Calculate the surplus for Ryan in the competitive market outcome. [2marks]
D. How has Ryan’s surplus changed relative to the previous part of the question? What is the reason for this change? Explain your answer. [2 marks] 5. Suppose that Trevor is a resident of The Bad Place who enjoys hosting loud parti
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
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shown below.
Resource Requirements and Profitability Model Materials ($/unit)
Labor (hrs./unit) Profit ($/unit)
material($units) labor(Hours/units)
profits($/units)
Classic 800 12 350
Modern 600 4 250
The firm has a budget of $185,000 to spend on materials. The
firm has 2,000 labor hours are available...
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probability that oil prices will go up, a 0.25 probability that
prices will go down, and a 0.50
percent probability they will remain the same. The value of each
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adjust is as follows:
Event
Probability
Airline
Oil Company
prices fall
0.25
$120
$70
prices same
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$105
$110
prices...
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When a firm is deciding how much cash to distribute to
stockholders, it should consider two things: (1) The overriding
objective is to maximize shareholder value and (2) the firm's cash
flows belong to shareholders, so income shouldn't be retained
unless management can reinvest those earnings at higher rates of
return than shareholders can earn themselves. The
model sets the distribution paid equal to net income minus the
amount of retained earnings necessary to finance the firm's optimal
capital budget....
When a firm is deciding how much cash to distribute to stockholders, it should consider two...
When a firm is deciding how much cash to distribute to
stockholders, it should consider two things: (1) The overriding
objective is to maximize shareholder value and (2) the firm's cash
flows belong to shareholders, so income shouldn't be retained
unless management can reinvest those earnings at higher rates of
return than shareholders can earn themselves. The-Select-capital
budgetingcapital structureresidual distributionItem 1 model sets
the distribution paid equal to net income minus the amount of
retained earnings necessary to finance the...
When a firm is deciding how much cash to distribute to stockholders, it should consider two...
When a firm is deciding how much cash to distribute to
stockholders, it should consider two things: (1) The overriding
objective is to maximize shareholder value and (2) the firm's cash
flows belong to shareholders, so income shouldn't be retained
unless management can reinvest those earnings at higher rates of
return than shareholders can earn themselves. The model sets the
distribution paid equal to net income minus the amount of retained
earnings necessary to finance the firm's optimal capital budget....
Fab Furniture has two manufacturing departments--Cutting and Finishing. It considers all of its manufacturing overhead costs...
Fab Furniture has two manufacturing departments--Cutting and
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(Order #75675) completed during the year are shown below.
Estimated Data
Cutting
Finishing
Total
Manufacturing overhead costs
$
6,210,000
$
6,750,000
$
12,960,000
Direct labor-hours
135,000
81,000
216,000
Machine-hours
54,000
270,000
324,000
Order # 75675
Cutting
Finishing
Total
Direct labor-hours
28
20
48
Machine-hours
20
23
43
Required:
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The closing cost would be $:
2. Determine the maximum 30-year fixed-rate mortgage amount for
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