Chapter 5: Problems 1,2 and 3

Chapter 5: Problems 1,2 and 3 - D (Oil $0.75 BA S D 2.25 =C...

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S A B $1.00 C $0.75 D ‘(Oil = $24) D (Oil = $18) 2.5 2.25 3 Rishi Sanghvi  Cost Benefit Analysis  Econ 4210-01 HW 3 Due: 03/05/2010 Question 1:  (a) Typically surplus changes occur in the primary market. If they are accounted for in the secondary  market then it results in double counting.  There are  no additional costs and benefits . Any effects in the secondary market are accounted  for in primary market demand curve. (b)  Reduction in the consumption of gasoline due to highway toll = 30,000 gallons  Tax revenue per gallon produced = $0.30 Loss of government revenue through taxation = $9,000 The loss of $9,000 is a social cost. Question 2:  (a) There is no change in social surplus as the effects are already accounted for in the primary  market. Double counting would result if costs and benefits are taken into account in the  secondary market.  (b)
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This note was uploaded on 04/03/2010 for the course ECON 4210 taught by Professor Donaldvitaliano during the Spring '10 term at Rensselaer Polytechnic Institute.

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Chapter 5: Problems 1,2 and 3 - D (Oil $0.75 BA S D 2.25 =C...

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