skip to Main Content
The smarter way
to do assignments.

Please note that this is just a preview of a school assignment posted on our website by one of our clients. If you need assistance with this question too, please click on the Order button at the bottom of the page to get started.

1. How would the change in total economic surplus beaffected if the law instead required health insurance to pay only $500 perprocedure?
2. Two firms, Sludge Oil and Northwest Lumber, have access to five productionprocesses, each one of which has a different cost and gives off a differentamount of pollution. The daily costs of the processes and the correspondingnumber of tons of smoke emitted are as shown in the following table:


(4 tons/day)
(2 tons/day)
(1 ton/day)
(0 tons/day)

Cost to Sludge Oil


Cost to Northwest

Lumber ($/day)

a. If pollution is unregulated, which process will each firm use, and what willbe the daily smoke emission?
b. The City Council wants to curb smoke emissions by 50 percent. To accomplishthis, it requires each firm to curb its emissions by 50 percent. What willbe the total cost to society of this policy?
Given MC= $1000. At this price, the number of procedures is 40. If the law requires that the health insurance will pay only $500 per procedure, then the quantity demanded at this level will be such that the total economic surplus will remain unaffected because the rise in the consumer surplus(as borne by the employee) will be equal to the fall in the producer surplus(as borne by the insurance company). If pollution is unregulated, then the firm Sludge oil will produce where the marginal cost is minimum. Sludge Oil: Cost per ton under process A: 50/4= 12.5 B: 70/3= 23 C:120/2=60 D: 200/1=200 E: 500 Thus, it will produce under process A….

Northwest lumber: Cost per ton under process A: 100/4=25 B: 180/3=60 C: 500/2=250 D: 1000/1=1000 E: 2000 As the minimum cost is under scheme A, the firm will choose scheme A. b) The total cost to the society will be half the amount which the firm has to bear. Total cost for firm A per ton =500+12.5= 512.5 Total cost for firm B per ton= 2000+25= 2025 Thus the expenses borne by the public will be 256.25 and 1012.5 respectively.


Clicking on this button will take you to our custom assignment page. Here you can fill out all the additional details for this particular paper (grading rubric, academic style, number of sources etc), after which your paper will get assigned to a course-specific writer. If you have any issues/concerns, please don’t hesitate to contact our live support team or email us right away.

How It Works        |        About Us       |       Contact Us

© 2018 | Intelli Essays Homework Service®

Back To Top