We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Cost Benefit Analysis - Math Problem Example

Comments (1)
Summary
Instructor Econ 361 DE – Problem Set Two Questions 1. Question a. Use a diagram to illustrate the deadweight loss that, in the absence of government intervention results from information asymmetry. Solution: A deadweight loss refers to specific forms of benefits that consumers or producers lose due to inefficiency within market operations…
Download full paper
GRAB THE BEST PAPER
Cost Benefit Analysis
Read TextPreview

Extract of sample
Cost Benefit Analysis

Download file to see previous pages... Asymmetric information can lead to disappearance of markets or rather inefficient allocation of resources, which causes the deadweight loss (Brent 98). A deadweight loss can be illustrated on the basis of the following graph. In the absence of government interventions from asymmetrical information, the market is likely to be inefficient thus causing a consumer surplus gain represented by CFEG and a consumer surplus loss represented by DGB. The graph CFEG+GEB represents the producer surplus. Therefore, the deadweight loss in this respect will be represented by DGB+GEB. Therefore, in the absence of the government interventions in a market with asymmetrical information, there is likelihood that the market will experience a deadweight loss represented by the graph DGB+GEB. b. Briefly describe a policy that could partially or entirely eliminate the deadweight loss resulting from information asymmetry. Solution: Deadweight loss results from the inefficiencies within various markets especially with respect to asymmetrical information. Efficient markets need symmetrical information to both buyers and producers. In the event that one party has more information than the other then there is likely to be inefficiency within the market, which definitely leads to deadweight loss. Nonetheless, various government policies can be employed in order to eliminate the deadweight loss resulting from information asymmetry (Brent 79). One such government policy is provision of adequate information in various sectors through various interventions such as cost-subsidization policies. The cost-subsidization policy will assist in making sure that every individual buyer has adequate information and access to specific services. c. Use the diagram, indicate the benefits, costs, or transfers that would result from implementing your policy (show these areas on your graph) and describe discuss each. Solution: The government’s involvement in eliminating the deadweight loss is likely to yield to various benefits, costs, and possible transfers. Through cost-subsidization programmes, the government will enable the customers to achieve social benefits hence reducing costs in respect to acquisition of goods. The following diagrams illustrate how gained social surpluses will assist in eliminating deadweight loss caused by the information asymmetry. In the above figure, the involvement of the government through cost-subsidization has caused an increase in the social surpluses hence making it possible for the elimination of the deadweight loss within an inefficient market. Another graph illustrating the significance in terms of the costs, benefits, and transfers that consumers may derive from government inventions involving the cost-subsidization policy that aims at providing adequate information regarding the market is represented below. This graph provides an illustration of how consumers benefit from the government invention. The benefits are increase in government revenue on one hand and gain in the consumer surplus. However, the transfer experienced is the shift of surplus from consumers to producers hence bringing about loss or cost to producers as they lose their surpluses. d. Describe any benefits, costs, or transfers that do not show up in your diagram. Solution: Even though benefits, costs, and transfers are illustrated in the above graphs, there are some costs, benefits, ...Download file to see next pagesRead More
Comments (1)
Click to create a comment or rate a document
mc
mcglynndameon added comment 24 days ago
Student rated this paper as
I never thought 3000 words essay could be written in such a free manner. I loved the idea of this essay. Will definitely use it for my own work!
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Decision-Making Models

The technique revolves around 5 simple steps:

  1. Setting up a probability distribution for each of the three variables – material cost, labor cost, and utility cost
  2. Preparing a cumulative probability distribution for each of the three variables
  3. Establishing random number intervals for each of the three variables
  4. Generating random numbers
  5. Simulating a series of trials
22 Pages(5500 words)Math Problem
Capital structure analysis
Now, IST is supposed to raise capital worth $500 million in order to build a fresh production facility. In the occurrence of a financial distress, the company would experience a great loss of both consumers as well as engineering talents. If IST takes a debt of $500 million, the managers of the company are afraid that the present value of the cost of financial distress would be more than the tax benefits by an amount of $20 million.
3 Pages(750 words)Math Problem
Aborption Cost Systems
The student has selected a very good example of a manufacturing concern that implements the job order costing system in order to account for the cost of every job completed. In airplane manufacturing, each job, which is supposedly the complete manufacturing of a plane, requires substantial cost which primarily include material and highly skilled technical cost.
1 Pages(250 words)Math Problem
Criticism of Absorption Cost System
But curtailing overproduction and reducing or eliminating inventories could lead to missed opportunities or higher gains during periods of higher demand, specially on products that see little or no change on their manufacturing, composition, or function.” My Response To The Student’s Answer: Throughout the course of history, management accounting writers have formed an opinion that there is an inversely proportional link between the allocation of fixed overheads and the want or incentive to over produce inventory.
5 Pages(1250 words)Math Problem
Ratio Analysis
3 Pages(750 words)Math Problem
Numerical analysis
These types of problems (especially systems of differential equations) are solved numerically using a number of similar algorithms which are based on the principles of numerical integration. The definition of the task "solve differential equation" means "integrate differential equation" so all differential equation numerical solving techniques are based on numerical integration, which is the problem of finding area under the curve described by differentiated function.
6 Pages(1500 words)Math Problem
Activity Based Cost accounting system
Activity Based Costing encourages managers to watch activities or functions that are value added . These are operational acts that help identify the activities or functions that get customers. Management should study cost drivers in decision making.
4 Pages(1000 words)Math Problem
ACTIVITY BASED COSTING: HIERARCHICAL PROFITABILITY
This cost has been calculated on the basis of traditional costing system. The Direct Material cost and Direct Labour has been calculated on the basis of total production units. The overhead costs have been allocated to products on the basis of traditional costing system.
3 Pages(750 words)Math Problem
Cost flow assumptions and effects of inventory errors
2 Pages(500 words)Math Problem
Multiple criteria decision analysis
In connection to this the main aim of this project is to use MCDA to solve the problem. For the last 10 year Bernard has wanted to own a home. After discussing with his wife, they decided to take a mortgage. But now the problem is, he does not
7 Pages(1750 words)Math Problem
Let us find you another Math Problem on topic Cost Benefit Analysis for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us