Suppose that you own a factory that emits smoke. The city of Hobart isdownwind of the factory and residents do not like the smoke emitted from your factory. The law states that your factory is allowed to emit unfiltered smoke only with permission ofHobart city council. The costs and benefits of filtering smoke from your production are reported in the table.
BEA111 Principles of Economics 1
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Question 1
Suppose that you own a factory that emits smoke. The city of Hobart isdownwind of the factory and residents do not like the smoke emitted from your factory. The law states that your factory is allowed to emit unfiltered smoke only with permission ofHobart city council. The costs and benefits of filtering smoke from your production are reported in the table.
| Surplus | Factory Emits Smoke | Factory Does not Emit Smoke |
| Factory ($) | 200 | 186 |
| Hobart ($) | 400 | 410 |
Question 2
Suppose that you run a tutoring service for economics students. The table below reports the demand for your services by 8 students per week. In the table are reported each student’s reservation price of a tutoring session per week. Note that each student demands at most one tutorial session per week.
In addition, the opportunity cost of your time is $24 per session. There are no competitors for your service.
| Student | Reservation Price ($ per session) | Number of Sessions given | Total Revenue ($ per week) | Marginal Revenue ($ per Week) |
| A | 40 | 1 | ||
| B | 38 | 2 | ||
| C | 36 | 3 | ||
| D | 34 | 4 | ||
| E | 32 | 5 | ||
| F | 30 | 6 | ||
| G | 28 | 7 | ||
| H | 26 | 8 |
