Question

Part II: Market Failure in the Passenger Airline Industry and Policy (30%) For full marks: Craphs: Plot graphs to scale on graph paper by hand, include a figure number, title, and label all axis including correct units, be neat and tidy and put in order in the assignment. Introduce the graph with a sentence before it. 2) For algebra, use short sentences to guide the reader (SSTGR) through your work. Example: "To find the perfectly competitive market equilibrium global daily quantity of global crude oil, (Q), set marginal consumer benefit equal to marginal producer cost and solve. Sput algebra> Now, substitute this market quantity back into either the MBConor Mch to find the perfectly competitive market price, P. Sput algebra Check with other marginal private benefit or cost equation. Concluding sentence. Ex. Therefore, the perfectly competitive market price is S/barrel of crude oil and the market quantity is barrels/day. - Answers should neat and tidy and ordered by question number. Let represent the quantity of passenger airflights where units are the distance travelled to fly from Vancouver to Halifax and back. Unrealistically, for simplicity, assume there is one price, that production is perfectly competitive and that supply and demand equations are linear. Market prices and quantities roughly correspond to 2018 values. Non-equity-weighted monetary measures of benefits, costs and surplus are used. Also assume that the only externality occurs due to GHG released when the jet fuel is combusted ignoring emissions due to producing the planes, land use for airports, transport emissions to get to the airport, and non-CO2 emissions from these activities. Assume the demand and supply equations in the global coal sector are respectively as follows: P Q"(P) = 800 - Q$(P) = P - 400

Answer 1

Page No. a) a (P) = 600-I (demond equation) DATE: 700- Реачов — зар Inderceloten Ipio 12400 a soolo Price 2100- o (P) = P - you (supply) P = 0 + 400 (Inverse supply equation) А4 Ф" -о, Речоо a = 8oo ; P = 1200 Priten 1200 t Quantity TOO

Pro No. o now setting me com equal to metode mblono = me proet 2400-3 0 = at you 2000 = 40 a l Market Cuantity = Fing a + 40o = rout you mar gool Xey 20%. t603 e com o s har en AD it duantity SOD a) i Total consumer benefits - Ar of Fo - COF (EFt AD) = Total consumer benefits = I 180o) (90072400) 250 (3300) 825000 Total consumer costs = Price x cluantity = 900 x 500 = 450000 In Total consumer surblue = Total Consumer Total consumer benefits 120000-1500000 = 375800

Page No. 2 Total variable producer benefit = Revenue = Pill DATE: 1 e qoox goo =4500oo vil Total vañable costs e variable costs = Ar of CEFO - = LÓF) (CO+EF) at (800) (400+ 900) =(250) (1300) = 325000 1. nil Total variable produser = - surplus Total producer - Total producer benefit cost = 450000 - 325000 = 125 Dou vil Total pn vate surplus - Producer t Consumer T surplus surplus = 125000 + 375000 = 5ooooo