<p> ECO424 Homework Assignment</p><p>Due date: 2/20/2014, Thursday, in class</p><p>Name: ______</p><p>Ch5 HW</p><p>1. Prove that the rate of output that equates MSB with MSC is efficient in the static sense.</p><p>2. What happens to the statically efficient rate of output when there is a technical change in the mode of production such as new satellite-based resource exploration techniques? What happens to the statically efficient rate of output when there is population growth? (Hint: These changes will shift either MWTP curve or MC curve. To which direction?) 3. A small community has discovered a mineral deposit within its borders. How can the community make its extraction sustainable? </p><p>4. When production uses a non-renewable resource input, sustainability is feasible if production function has the form of the Cobb-Douglas function, i.e., with , given enough K, and . Q devotes the amount of output, K is the amount of capital, and R is the amount of the non-renewable resource. (1) Draw the graph for , with .</p><p>(2) Explain why sustainability is feasible given enough K, and . </p><p>(3) Mathematically prove that , with , has constant returns to scale (CRS). </p><p>Ch6 HW 1. Show that when external benefits (i.e., a positive consumption externality) are involved, market output and price tend to be too low relative to socially efficient levels.</p><p>2. Roads (except for toll roads) are typically open-access. If rents in this case are defined as the total net gain in travel time saved by using a particular road, then in what sense are the rents dissipated?</p>