Economics problem 1?

Question

Your neighbor likes to play loud music-the louder the better. because you like to study, her music imposes a coston you. Use D to stand for volume of her music in decibles., B for her benefit, and C for your costs, where costs and benefits are measured in dollars. For any given volume D, your neighbor's benefit is B= 0.54D-0.003Dsquare which means her marginal benefit is MB=0.54-0.006D Your cost is C=A*D+0.001Dsquare which implies that your marginal cost is MC=A+0.002D where A is constant. Assuming that A=0.10,

what is the efficient noise limit? What is the efficient Pigouvian tax?

Answer 1

either equate b=c and b happy or equate m.r.=m.c. (one of outcomes will always b same,the right one & then check m.r.-mc=mpi and make sure mpi' is decreasing...... bla bla bla

the reults here is siple as m.r. is linear and we find i solved by first method d=530/4 thats 132.5. now put it into b or c and get eq tax, any other tax could carry some deadweight loss- socially inefficient production in terms of this analysis it comes out to be 18.88125$. interesting but due to benifit &cost slopes; i hope u had 0s correct now do it fast...

Answer 2

Equilibrium will be at point there MB=MC, so

0.54-0.006D=0.10+0.002D

D=55

At this level your costs will be C=8.525 and neighbor's benefit will be B=20.625

Answer 3

We'll talk about your cheating tonight at the exam.