In Almond country, farmers are experimenting with new genetically modified franken-bees' that are highly effectively at...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
In Almond country, farmers are experimenting with new genetically modified franken-bees' that are highly effectively at pollinating their nut trees. However, the bees also produce a corrosive form of honey that can damage the paint on cars. Biologists and transportation experts at UC Davis have estimated that each franken-bee hive creates an additional $50 worth of damage to local vehicles. Currently 200 franken-bee hives have been introduced into Almond country. Local motorists have demanded action to curb the franken-bee blight. They have demanded that farmers begin to remove them from the environment. The marginal cost of abatement is uncertain. Anti-bee groups claim costs will be low and estimate it will follow the function MC = -100+QA, where QA is the amount of abatement. Local farming groups argue that abatement will be much more costly than that and claim abatement costs will be MC = Q. You lead the agency responsible for regulating the bees. Local government officials have told you that you can cap the number of bee hives to deal with the situation. You can auction off a fixed amount of bee hive licenses to control the total number of bee hives in your area. You believe that there is a 50% chance that industry has the correct abatement curve and a 50% chance that the environmentalists have the correct estimate. Your only regulatory tool is a single cap, and you have determined that the best expected cap would be 100 hives (meaning there must be abatement of 100 hives down from 100 to 200). (a) If it turns out that the marginal cost of abatement is low (equal to 100+Q), what would be the deadweight loss given the cap you derived in the previous answer? You may illustrate your answer using the figure below. 200 100 50 50 100 150 200 (b) Now assume that you can also introduce a floor price on bee-hives and that you will only sell a license if the price rises above $30 a hive. However you will never sell more than the cap of 100 hives. Now what would be the deadweight loss if the marginal cost of abatement again turns out to be low? You may illustrate your answer using the figure below. 200 100 50 50 100 150 200 In Almond country, farmers are experimenting with new genetically modified franken-bees' that are highly effectively at pollinating their nut trees. However, the bees also produce a corrosive form of honey that can damage the paint on cars. Biologists and transportation experts at UC Davis have estimated that each franken-bee hive creates an additional $50 worth of damage to local vehicles. Currently 200 franken-bee hives have been introduced into Almond country. Local motorists have demanded action to curb the franken-bee blight. They have demanded that farmers begin to remove them from the environment. The marginal cost of abatement is uncertain. Anti-bee groups claim costs will be low and estimate it will follow the function MC = -100+QA, where QA is the amount of abatement. Local farming groups argue that abatement will be much more costly than that and claim abatement costs will be MC = Q. You lead the agency responsible for regulating the bees. Local government officials have told you that you can cap the number of bee hives to deal with the situation. You can auction off a fixed amount of bee hive licenses to control the total number of bee hives in your area. You believe that there is a 50% chance that industry has the correct abatement curve and a 50% chance that the environmentalists have the correct estimate. Your only regulatory tool is a single cap, and you have determined that the best expected cap would be 100 hives (meaning there must be abatement of 100 hives down from 100 to 200). (a) If it turns out that the marginal cost of abatement is low (equal to 100+Q), what would be the deadweight loss given the cap you derived in the previous answer? You may illustrate your answer using the figure below. 200 100 50 50 100 150 200 (b) Now assume that you can also introduce a floor price on bee-hives and that you will only sell a license if the price rises above $30 a hive. However you will never sell more than the cap of 100 hives. Now what would be the deadweight loss if the marginal cost of abatement again turns out to be low? You may illustrate your answer using the figure below. 200 100 50 50 100 150 200
Expert Answer:
Answer rating: 100% (QA)
The images you provided contain a scenario regarding the introduction of genetically modified frankenbees in Almond country and they outline the econo... View the full answer
Related Book For
Posted Date:
Students also viewed these economics questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Instead of running the internal combustion engine and mostly being purchased for private consumption, the automobiles of the future are likely to be battery-powered, driverless, and shared. The...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
BA%20508%202022%20Sprg%20Group%20Proj%202%20instructions.pdf ^ Total variable OH incurred during the year was $83,420 and total fixed OH incurred was $140,540. OH gets applied to products using...
-
Fresh Fruits Corporation wholesales peaches and oranges. Nora Boyd is working with the company's accountant to prepare next year's budget. Ms. Boyd estimates that sales will increase 5 percent...
-
The major reason that elderly people are so susceptible to telemarketing fraud is that they: a. Are often financially in need. b. Have an excess amount of cash to invest. c. Are often lonely and...
-
This case stems from a rocky relationship between two Texans. Lawrence Shipley was the president of Shipley Do-Nut Flour & Supply Co., and Andrea Vasquez was a substitute school teacher in the...
-
A blood bank wants to determine the least expensive way to transport available blood donations from Pittsburg and Staunton to hospitals in Charleston, Roanoke, Richmond, Norfolk, and Suffolk. Figure...
-
Describe persistence design under NoSQL technologies.? What is NoSQL polyglot persistence?
-
Let X be the winnings of a gambler. Let p(i) = P(X = i) and suppose that Compute the conditional probability that the gambler wins i , i = 1, 2, 3, given that he wins a positive amount. 1/3: p(1) %3...
-
1. Complete the tables below to report NPVs of Projects Net CFs as you change the column input variable (CoGS% or SalesYr1) in the origianl CF Model (to left) one at a time. 2. Top Table => Change...
-
You ascertain that inventories and (to a lesser extent) trade receivables have risen significantly when you consider that sales have increased by only 5%. Discuss the questions that you ask and the...
-
Calculate the van der Waals parameters from critical point data for the following gases: He, CH4, NH3, and H2O. Explain the relative magnitudes of a and b from a physical basis.
-
Assume that money demand takes the form \[ \frac{M}{P}=Y\left[1-\left(r+\pi^{e}ight)ight] \] where \(Y=1,000\) and \(r=0.1\). a. Assume that, in the short run, \(\pi^{e}\) is constant and equal to...
-
Compute the two-year nominal interest rate using the exact formula and the approximation formula for each set of assumptions listed in (a) through (c). a. \(i_{t}=2 \% ; i_{t+1}^{e}=3 \%\) b....
-
For which of the problems listed in (a) through (c) would you want to use real payments and real interest rates, and for which would you want to use nominal payments and nominal interest rates to...
-
On January 1, 20X9, Parent Corporation acquired 90 percent of Small Corporation's stock for $315,000 cash. At that date, the fair value of the noncontrolling interest was $35,000, and small reported...
-
Proposals have been made to ?sail? spacecraft to the outer solar system using the pressure of sunlight, or even to propel interstellar spacecraft with high-powered, Earth-based lasers. Sailing...
-
Visit the Federal Trade Commission website (www.ftc.gov). What is the FTCs current mission? What are the primary areas for which the FTC has responsibility? Review the last two months of press...
-
As we have seen thus far, the size of the consuming population over the age of 50 continues to grow. What are some of the current ethical issues involved in targeting this age group? As this group...
-
What is the relationship between marketing ethics and organizational performance? What are the elements of a strong ethical compliance program to support responsible marketing and a successful...
-
Find TC, AFC, AVC, AC, and MC from the following table: 100 VC $ 0 Units FC $100 012345 40 100 60 100 70 100 85 100 130
-
Explain how each of the following will affect the average fixed cost, average variable cost, average total cost, and marginal cost curves faced by a steel manufacturer: a. New union agreement...
-
A firm has fixed costs of $100 and variable costs of the following: a. Show AFC, ATC, AVC, and MC in a table. b. Graph the AFC, ATC, AVC, and MC curves. c. Explain the relationship between the MC...
Study smarter with the SolutionInn App