Question 3 (37 points) Toys VR has a factory which makes toys using r 2 0 units

Question

Question 3 (37 points) Toys VR has a factory which makes toys using r 2 0 units of natural rubber and y 2 0 units of plastic and would like to maximize its profit. The government has declared that E is the maximum level of emissions allowed by any factory. The use of plastic and rubber produces emissions given by the emission function g where . The profit function for toys is given by: f(x,y) In y +2x a) Write down the constrained optimization problem of the firm i.e. write down the function to be optimized, the control variables that optimize it and the boundary con- straints. Name this problem (P3) b) Set up the Lagrangian and write down the first order and slackness conditions and other conditions on the variable. c) At optimum, is there any value of E for which Toys V R produces lower emissions than the government? d) Is there any value of E for which no natural rubber is used in making toys? e) Is there any value of E for which no plastic is used in making toys'? f) Is there any value of E for which both plastic and natural rubber are used in making toys? g) How much is Toys V R willing to bribe the government in order for a unit increase in the emission cap E?

Explanation / Answer

Keynesian economists generally argue that, as aggregate demand is volatile and unstable, a market economy will often experience inefficient macroeconomic outcomes in the form of economic recessions (when demand is low) and inflation (when demand is high). These can be mitigated by economic policy responses, in particular, monetary policy actions by the central bank and fiscal policy actions by the government, which can help stabilize output over the business cycle.[3] Keynesian economists generally advocate a managed market economy – predominantly private sector, but with an active role for government intervention during recessions and depressions.[4]

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.