1. Lesotho's footwear industry currently consists of two footwear manufacturers, one in Maseru and the other...

 

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1. Lesotho's footwear industry currently consists of two footwear manufacturers, one in Maseru and the other in Maputsoe. In Maseru, the marginal benefit associated with pollution cleanup is MB 300-100, while in Maputsoe, the marginal benefit associated with pollution cleanup is MB 200-4Q. Suppose that the marginal cost of cleanup is constant at M12 per unit. = What is the optimal level of pollution cleanup in each of the 2 industries? [6] b. Calculate the efficiency loss in each case [4] 2 Consider that the supply curve for cold drink is given by Q' 20+ 4P and the demand for cold drink is given by Qd=50-2P. Suppose that a tax is imposed on the production of cold drink of M3 per unit. Calculate, a. pre-tax and post-tax equilibrium price and quantity of beer. b. tax burden borne by the producer and consumer. [8] 171 3. Consider the market for potatoes with inverse demand given by P30-20 and inverse supply given by P10+ 20". Now suppose the government implements a price subsidy programme instead of the price support program. Let the government target price be M24. a Calculate the equilibrium price and quantity, b. The government implements a unit subsidy (paid to the farmers) that will ensure that farmers receive a price (after the rubsidy) of M24 for their potatoes. Calculate the new equilibrium prices and quantity. 161 c. Suppose that the government is concerned about potato farmers' ability to earn adequate income from farming potatoer and decides to implement a price support policy whereby a price floor of M24 will be set in the market for potatoes and the government will purchase and destroy the surplus potatoes at a price of M24. Calculate the price of exchange, quantity exchanged in the marketplace, and the amount of potatoes purchased and destroyed by the government [6] 1. Lesotho's footwear industry currently consists of two footwear manufacturers, one in Maseru and the other in Maputsoe. In Maseru, the marginal benefit associated with pollution cleanup is MB 300-100, while in Maputsoe, the marginal benefit associated with pollution cleanup is MB 200-4Q. Suppose that the marginal cost of cleanup is constant at M12 per unit. = What is the optimal level of pollution cleanup in each of the 2 industries? [6] b. Calculate the efficiency loss in each case [4] 2 Consider that the supply curve for cold drink is given by Q' 20+ 4P and the demand for cold drink is given by Qd=50-2P. Suppose that a tax is imposed on the production of cold drink of M3 per unit. Calculate, a. pre-tax and post-tax equilibrium price and quantity of beer. b. tax burden borne by the producer and consumer. [8] 171 3. Consider the market for potatoes with inverse demand given by P30-20 and inverse supply given by P10+ 20". Now suppose the government implements a price subsidy programme instead of the price support program. Let the government target price be M24. a Calculate the equilibrium price and quantity, b. The government implements a unit subsidy (paid to the farmers) that will ensure that farmers receive a price (after the rubsidy) of M24 for their potatoes. Calculate the new equilibrium prices and quantity. 161 c. Suppose that the government is concerned about potato farmers' ability to earn adequate income from farming potatoer and decides to implement a price support policy whereby a price floor of M24 will be set in the market for potatoes and the government will purchase and destroy the surplus potatoes at a price of M24. Calculate the price of exchange, quantity exchanged in the marketplace, and the amount of potatoes purchased and destroyed by the government [6]

Answer rating: 100% (QA)

1 Lesothos footwear industry a Maseru MB 300 100Q MC R12 Equate MB MC 300 100Q R12 100Q R288 Q R288R... View the full answer