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Unformatted text preview: vestment. 4. 1 a. Total beneﬁts are maximized when MB ( Q ) = 100-4 Q = 0, which means Q = 25. b. The total costs of recycling are minimized when Q equals zero. c. Setting MNB ( Q ) = 100-4 Q-2 = 0 and solving, we see that the net beneﬁts of recycling are maximized when Q = 24 . 5. d. The optimal level of recycling is 24.5. At this level, the net beneﬁts are maximized. 5. a. 16 units, since 12 - 3(2) - 4(1) + 10 + 2(2) = 16. b. Complements, since the coeﬃcient of P y is a negative number (-4). This means an $ 1 increase in the price of good Y decreases the demand for good X by 4 units. c. Normal, since the coeﬃcient of M is a positive number (1). This means a $ 1 increase in income increases the demand for good X by 1 unit. d. The demand curve is Q d x = 12-3 P x-4(1) + 10 + 2(2) = 22-3 P x . The inverse demand curve is thus P x = 22 3-1 3 Q d x . 2...
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This note was uploaded on 02/20/2011 for the course ECON 560 taught by Professor Pe during the Spring '11 term at Maryland.
- Spring '11