Suppose that the market equilibrium price for a good is $3.00. A nonbinding price ceiling in this market will result in a price
set Choose one:A. below $3.00.B. above $3.00.C. More information is needed to determine the answer.D. at $3.00.
2 answers:
Answer:
A) below $3.00
Explanation:
In order for a price ceiling to be binding, it must be set below the market's equilibrium price. A binding price ceiling results in a supply shortage because the total quantity demanded will increase, while the total quantity supplied will decrease. The economic loss resulting from the shortage is known as deadweight loss.
The deadweight loss is represented on the attached graph as the area below the demand curve and above the supply curve, and left of the equilibrium price.
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Answer:
The incremental benefit cost ratio is less than 1 therefore we must select site 1.
Explanation:
The incremental BCR can be determined using the following formula
8% , 10)
⇒
⇒ 8%, 20)
⇒
⇒ = $203,704.42
Incremental initial investment = 203,704.42 - 149,029.49
= $ 54,674.93
Incremental benefits = 580,000 - 520,000 = 60,000
Incremental O&M = 75,000 - 80,000 = - $ 5000
Incremental Disbenefits = 140,000 - 90,000 =$ 50,000
All solving using the present worth method also incremental benefit cost ratio comes out to be 0.2743.
The incremental benefit cost ratio is less than 1 therefore we must select site 1.