ECON101 Assignment

. Describe some of the tradeoffs faced by each of the following: a. a student deciding how many hours a week to go to work. b. a city deciding how much to spend on a public playground. c. a manager deciding how many employees to hire for a new store. 2. Explain each of the following statements using supply-and-demand diagrams. Identify which factor(s) of supply and/or demand are being affected, and how the equilibrium price and quantity are affected. a. The effect on the orange just market when a cold snap hits Florida. b. The effect on the market for rooms in Caribbean resort when Canada experiences a particularly warm summer. c. The effect on the market for gasoline and the market for SUVs when a war breaks out in the Middle East. Draw two graphs, one for each market. 3. Lawmakers decide that Canada should reduce greenhouse gases by reducing its use of gasoline. It imposes a tax on each litre of gasoline sold. a. Should it impose this tax on producers or consumers? Explain with the use of supply and demand graphs. b. Is the demand for gasoline were more elastic, would this tax be more effective or less effective in reducing the quantity of gasoline consumed? Explain using words and a diagram. FSJ NLC ECON101 2 4. Hotel rooms in Sunville go for $100 a day, and 2000 rooms are rented on a typical day. To raise revenue, the mayor decides to charge hotels a tax of $10 per rented room per day. After the tax is imposed the going rate for hotel rooms rises to $108, and the number of rooms rented falls to 1800. a. Calculate the amount of revenue this tax raises for Sunville and the deadweight loss of the tax. (Hint: the area of a triangle is ½ x base x height.) b. How much of the tax is paid by consumers? By producers? 5. Ringo loves playing rock-and-roll music at high volume. Luciano loves opera and hates rock and roll. Unfortunately, they are next-door neighbours in an apartment building with paper-thin walls. a. What is the externality here? b. What command-and-control policy might the landlord impose? Could such a policy lead to an inefficient outcome? c. Suppose the landlord lets the tenants do whatever they want. According to the Coase theorem, how might Ringo and Lucian reach and efficient outcome on their own?

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