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Marginal Analysis: Draw and explain the Marginal Benefit (MB) – Marginal Cost (MC) model. Use marginal...

  1. Marginal Analysis: Draw and explain the Marginal Benefit (MB) – Marginal Cost (MC) model. Use marginal analysis to analyze the proper amount of pollution clean-up efforts in the Chesapeake Bay. Make a graph illustrating marginal benefits and marginal costs. Explain the analysis. Why does the intersection between the MB and MC curves illustrate the optimal level of pollution clean-up?
  2. The PPF: Draw a Production Possibilities Frontier (PPF) for the production of two goods, machine tools (a capital good) and donuts (a consumer good). Put machine tools on the vertical axis and donuts on the horizontal axis. Briefly explain what the PPF curve represents.
  3. Economic Growth: Use the PPF from a country to illustrate the effects of saving and investment upon national GDP.
  4. Disaster: Use the PPF to show the effects of a war which destroys a large amount of productive capital stock, including factories and machines.
  5. Market Failure: List and explain the main sources of market failures.
  6. Role of Government: What is the proper role of government in the economy? Make a list of the economic functions of the government and briefly explain each.

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Expert Solution

Marginal Analysis

Rahul Sunny answered 2 years ago
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