ECONOMICS FOR PUBLIC ADMINISTRATORS FINAL EXAM
Answer All the Questions-
Question A -
Healthy Candy is located in the City of Atlanta and produces chocolate candies for international consumption. In the course of candy production, Healthy Candy releases pollution as a negative externality into the atmosphere of the City of Atlanta. Some of the pollution-related problems include skin cancer, contamination of drinking water, breathing epidemics, birth defects, and offensive odor. Sadly, Healthy Candy does not do anything to bear the costs associated with the health and ecological problems Atlanta residents suffer. Interestingly, Healthy Candy believes that Atlanta residents do not know about the problems and then leaves Atlanta residents to pay for the health and ecological problems they suffer from the pollution generated in the production of candies. What a rip-off against Atlanta residents!!! Healthy Candy smiles home with huge profits. Healthy Candy's customers worldwide feel satisfied with Healthy Candy's products and organize international events to praise the incredible quality of Healthy Candy's products. Alas, Atlanta residents apparently turn out to be victims in the process of production and consumption of Healthy Candy's products.
Suppose that you are a public administrator in the City Government of Atlanta, have trained in Economics for Public Administrators from Clark Atlanta University, and are working with the following marginal benefits and costs for Healthy Candy's chocolate candies, where Q is thousands of chocolate candy boxes and P is price per chocolate candy box:
- MPB (Marginal Private Benefit) = 120 - 0.2Q (benefits to individual Atlanta consumers of Healthy Candy's products).
- MPC (Marginal Private Cost) = 20 + 0.2Q (costs of producing candies by Healthy Candy).
- MEB (Marginal External Benefit) = 0 (an external benefit is a positive externality: candy production benefits to the City of Atlanta may include a healthy environment and healthy residents in Atlanta. In the current context, external benefits are zero).
- MEC (Marginal External Cost) = 0.1Q (an external cost is a negative externality: health and ecological problems associated with the pollution generated by Healthy Candy that affect Atlanta's residents and environment).
1. With your understanding of CANVAS Class Lectures, Required Textbooks, and your own lecture notes,
i. Find the competitive equilibrium, Qc and Pc.
ii. Find the efficient equilibrium, Qe and Pe.
iii. Show (a) the competitive equilibrium and (b) the efficient equilibrium in the same graph that is properly labeled.
2. Suppose that Healthy Candy owns the rights to pollute the atmosphere of the City of Atlanta and is negotiating with concerned public administrators in the City Government of Atlanta to generate less pollution in the production of candies.
i. For the 150th chocolate candy box, determine the range within which a payment would be acceptable to both Healthy Candy and the concerned public administrators. Show in the graph for 1(iii) above (a) the 150th chocolate candy box, (b) the price Healthy Candy would take, and (c) the price the concerned public administrators would pay on behalf of Atlanta residents.
ii. In 200-300 words, clearly explain the price range associated the 150th chocolate candy box.
Question B -
For each question in Question B, you must use at least one reference from among the required textbooks and at least one scholarly reference from outside the required textbooks. You must provide in-text citations and references based on the APA format.
You must not use Wikipedia and dictionaries as references.
1. In 700-1,000 total words, Identify and discuss the four types of tax and explain the relationship between each tax type and fiscal decentralization.
2. In 700-1,000 total words, clearly explain at least four reasons for wealth inequality in the United States.
3. Based on Class Discussion and Rafael Reuveny's contribution on "International Trade and Public Policy: The Big Picture", Chapter 17, in Robbins, Donijo, Handbook of Public Sector Economics, (New York: Taylor and Francis, 2005), answer the following questions:
Russia and Iran each have one resource unit and can use that resource unit to produce either crude oil or vegetable oil, suggesting some opportunity cost. With its resource unit, Iran can produce either 100 barrel crude oil or 60 barrel vegetable oil. With its resource unit, Russia can produce either 80 barrel crude oil or 30 barrel vegetable oil. With this information,
a. Determine the commodity/commodities in which one or both of the two countries have ABSOLUTE ADVANTAGE. Defend your determination as clearly as possible in 50-100 total words,.
b. With full workings shown in your paper, find the OPPORTUNITY COST of producing crude oil for Iran.
c. With full workings shown in your paper, find the OPPORTUNITY COST of producing vegetable oil for Iran.
d. With full workings shown in your paper, find the OPPORTUNITY COST of producing crude oil for Russia.
e. With full workings shown in your paper, find the OPPORTUNITY COST of producing vegetable oil for Russia.
f. In 50-100 total words, explain the commodity in which Iran has COMPARATIVE ADVANTAGE and why.
g. In 50-100 total words, explain the commodity in which Russia has COMPARATIVE ADVANTAGE and why.