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As newly appointed Energy Czar your goal is to reduce the total demandfor residential heating fuel in your state You must choose one of three legisla-tive proposals designed to accomplish this

As newly appointed “Energy Czar,” your goal is to reduce the total demandfor residential heating fuel in your state. You must choose one of three legisla-tive proposals designed to accomplish this goal: (a) a tax that would effec-tively increase the price of residential heating fuel by $2; (b) a subsidy thatwould effectively reduce the price of natural gas by $1; or (c) a tax that wouldeffectively increase the price of electricity (produced by hydroelectric facili-ties) by $5. To assist you in your decision, an economist in your office hasestimated the demand for residential heating fuel using a linear demand speci-fication. The regression results are presented on the next page (page 114).Based on this information, which proposal would you favor? Explain.As the owner of Barney’s Broilers—a fast-food chain—you see an increase inthe demand for broiled chicken as consumers become more health consciousand reduce their consumption of beef and fried foods. As a result, you believeit is necessary to purchase another oven to meet the increased demand. Tofinance the oven you go to the bank seeking a loan. The loan officer tells youthat your revenues of $750,000 are insufficient to support additional debt. Toqualify for the loan, Barney’s Broilers’s revenue would need to be $50,000higher. In developing a strategy to generate the additional revenue, you collectdata on the price (in cents) per pound you charge customers and the relatedquantity of chicken consumed per year in pounds. This information is contained

May 01 2020 View more View Less

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