Due Wednesday 10/16
Suppose a small community has a wastewater agency that charges all customers $100 per year. There are currently 10,000 customers of type L who are inexpensive to serve (they live close to the treatment plant). Those customers are also known to have a demand elasticity of -0.5. The agency’s `WTA_L` to serve them is perfectly elastic at $80. The agency also has 5,000 customers of type H who are more expensive to serve (they live further away) and who have a demand elasticity of -1. The agency’s `WTA_H` is perfectly elastic but at a price that will need to be deduced. It is also known that the agency is currently running a deficit of $100,000 in the cross subsidy program: the government is having to contribute $100,000 a year to keep the system in operation. To address the deficit, the government is considering raising the price charged to both groups to $110. Finally, in doing this problem you should assume that using the wastewater agency is not mandatory: either type of customer could switch to a septic system (home treatment) if they choose not to be customers of the agency.
Suppose a community usually has two suppliers of gasoline: firm A, which has a supply curve given by WTAa = 2+(1/6)*Qa, and firm B which brings in gasoline from other areas with a WTAb = $5. The demand for gasoline is given by WTP = 24 – (1/5)*Q. However, a hurricane has damaged local infrastructure and firm B can no longer bring in any gasoline. Gasoline prices have risen and there are calls for the government to impose a price control that would limit the price of gas to its usual no-hurricane level.
Suppose four people, person 1 (P1) through person 4 (P4), are asked to rank several hypothetical cars with different combinations of features. Each person is to assign a rank of 1 to the car they like the most, a 2 to the car they like second most, and so on. If they like two cars equally, both receive the same number (eg, there may be two cars ranked 2). The table below shows the results:
|Car||Horsepower||MPG||P1 Rank||P2 Rank||P3 Rank||P4 Rank|
Using this data, please answer the following questions: