Economics Answers

Automous consumption =100m

Investment spending =100m

Government spending 200milion

Export =150 million

Automous export =100 million

Marginary propensity to consume =1/3

Taxes rate is 1/10

Marginary propensity to import 1/10

YF=2150 million

Questions 1.1 culculate the level of Automous spending in the country

1.2calculate the size of multiplier

1.2 calculate equilibrium level of the income

Distinguish between active balances and passive balances and mention the main (6)

determinant of each.

There are three industrial firms in Happy Valley.

Firm Initial Pollution Level Cost of Reducing Pollution by 1 Unit

A 30 $20

B 40 $30

C 20 $10

The government wants to reduce pollution to 60 units, so it gives each firm 20 tradable

pollution permits.

a) Who sells permits and how many do they sell? Who buys permits and how many do

they buy? Briefly explain why the sellers and buyers are each willing to do so. What is

the total cost of pollution reduction in this situation?

b) How much higher would the costs of pollution reduction be if the permits could not be

traded?

Distinguish between active balances and passive balances and mention the main determinant of each. (6)

The demand curve for a public park for two consumers who represent society is given by:

𝑃 = 150 − 𝑄𝐷1, 𝑃 = 250 − 𝑄𝐷2

Graph the two demand curves and show the marginal social benefit curve for this public

park. If the marginal cost of providing the park was €240, what would the optimum

provision of this park be? Explain why any quantity above or below this amount would

represent a less than efficient allocation.

With reference to financial management, write a short essay on the concept of

time value of money as a key fundamental in respect of managers’ maximising corporate value for shareholders. Maximum 600 words and include references.

The demand curve for a public park for two consumers who represent society is given by:

𝑃 = 150 − 𝑄𝐷1, 𝑃 = 250 − 𝑄𝐷2

Graph the two demand curves and show the marginal social benefit curve for this public

park. If the marginal cost of providing the park was €240, what would the optimum

provision of this park be? Explain why any quantity above or below this amount would

represent a less than efficient allocation.

The following graph shows the equilibrium price and quantity in the market for chewing

gum. Suppose the Aragonian government passes a bill to impose a tax of 2 dollars on the production

of chewing gum.

a) What is the new equilibrium price and quantity?

b) What is the amount of tax revenue earned by the government?

c) What is the deadweight loss of this tax?

d) Which is greater: the loss in consumer surplus or the loss in producer surplus?

The following graph shows the equilibrium price and quantity in the market for chewing

gum. Suppose the government passes a bill to impose a tax of 2 dollars on the production

of chewing gum.

a) What is the new equilibrium price and quantity?

b) What is the amount of tax revenue earned by the government?

c) What is the deadweight loss of this tax?

d) Which is greater: the loss in consumer surplus or the loss in producer surplus?

With reference to financial management, write a short essay on the concept of cost of capital as a key fundamental in respect of managers’ maximising corporate value for shareholders. Maximum 600 words and include references.