PS10 - Intermediate Microeconomics, Winter 2008 Problem Set...

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Intermediate Microeconomics, Winter 2008 Problem Set No 10 due: Wednesday, Feb 20; Thursday, Feb 21 Problems Please, answer the following questions in the book. Chapter 9: 24, 26, *29, 33, *34 (see pp304-307) Q1) Explain in your own words why the competitive market outcome maxi- mizes welfare in our model. Try to write it in a way your parents/friends would understand it, without having studied economics. (You can keep it short, about 3-5 sentences.) Q2) Let us use the competitive model to think about taxation. Demand for some good is given by D ( p ) = 1 p and supply by S ( p ) = p . The government The average valuation for having national defense is B D = 1 8 , while the cost of providing the defense is C D = 6 64 . If the governement wants to raise tax with it? Overall, should the government raise the taxes or not, i.e., what are Multiple Choice because, A) bidding drives up the price of the factor until no economic rent exists. B) there is no market for such factors.
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This note was uploaded on 12/10/2011 for the course ECON 401 taught by Professor Burbidge,john during the Winter '08 term at Waterloo.

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PS10 - Intermediate Microeconomics, Winter 2008 Problem Set...

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