Economics Homework Help

Requests: The task consists of solving 6 problems related to the economy field(you can find them below but also in the pdf file – they are the same exercises). Your final work should clearly state the question number, the subpoints answered and all the graphics requested and the formulas used. I also attached the course textbook to guide you in case you encounter any issues.

Exercises List ( a total of 6 exercises):

Q.1. Asian Development Bank’s publication (2013) titled “Cost-Benefit Analysis for Development: A Practical Guide” provide real life examples of CostBenefit Analysis (CBA): (i) Economics Analysis of Integrates Service Projects; (ii) Economic Analysis of transport Improvements; (iii) Appraising Electricity Projects; and (iv) Economic Analysis of Power Generation and Transmission Projects. Choose one of these cases and summarize it in a single page. In the summary include crucial information such as the case description, life of the project, benefits and costs, methods used in assessing benefits and costs, and discount rate being used.

Q.2. Suppose that demand is perfectly inelastic. Supply is normal and upward sloping. What is the economic incidence of a unit tax placed on suppliers? Illustrate this with an appropriate diagram.

Q.3. Suppose the original before-tax demand curve for CD players is P = 100 – 2Qd. Suppose further that supply is P = 5 + 3Qs. Now suppose a $5 unit tax is imposed on consumers.

a. Graph (i) market demand and supply, (ii) before tax equilibrium ( 0 , 0 ), and (iii) after tax equilibrium ( 1 , , )?

b. Calculate the after-tax equilibrium price and quantity, ( 1 , , )?

c. How much tax revenue is raised?

Q.4. A monopoly faces the market demand, = 600 − 2 where is the price of the product and is the quantity demanded. The total cost of production of the monopoly is = 500 + 2 .

a. Calculate the profit maximizing output level and price of the monopoly. Calculate the profit.

b. Government imposes a unit tax of $180 on consumers which shifts the demand curve down to, = 420 − 2 . Calculate the price paid by the consumers and price received by monopoly. Calculate also after-tax profit of the monopoly.

c. Calculate the tax revenue.

Q.5.In an effort to reduce alcohol consumption, the government is considering a $1 tax on each gallon of liquor sold (the statutory incidence is on producers). Suppose that the demand curve is = 500,000 − 20,000 where is the number of gallons of liquor demanded and is the price per gallon. The supply curve is = 30,000 and is the number of gallon supplied.

a. Compute price paid by consumers, , and price received by producers, .

b. How much revenue does the tax raise for the government? How much of the revenue comes from consumers and how much from producers?

c. Suppose that the demand for liquor is more elastic for younger drinkers that the older drinkers. Will the liquor tax be more, or less, or equally effective at reducing liquor consumption among young drinkers? Explain.

d. Draw a graph to illustrate the excess burden of the tax. Calculate excess burden.

e. Suppose that each gallon of liquor consumed generates a negative external cost $0.50. How does this effect the excess burden associated with the unit tax on liquor?

Q.6. A pharmaceutical company produces drugs for various types of diseases. Government levies a unit tax on the two drugs sold by the pharmaceutical company. Illustrate the following in a graph for each scenario:

i. initial equilibrium price and quantity in the medicine market,

ii. the prices faced by consumers after the tax,

iii. the price faced by the pharmaceutical company after the tax,

iv. after tax equilibrium quantity bought and sold in the market,

v. tax revenue as an area in the graph raised by the government, and

vi. excess burden of the tax.

a. The demand for a drug of a rare disease is perfectly inelastic while the supply is elastic.

b. The demand for an allergy drug is perfectly elastic while the supply is elastic