Calculate the NPV of the project. Would you pursue or not this project? (Show in detail your calculations in the space below)
January 4, 2018
f the own price elasticity of demand for paper books is -2, how will a 4 percent decrease in the price of paper books affect your overall revenues from both paper book and ebook sales?
January 4, 2018

A tax that would effectively increase the price of electricity (produced by hydroelectric facilities) by $4. To assist you in your decision, an economist in your office has estimated the demand for residential heating fuel using a linear demand specification. The regression results are presented as follows. Based on this information, which proposal would you favor? Explain.

As newly appointed “Energy Czar,” your goal is to reduce the total demand for residential heating fuel in your state. You must choose one of three legislative proposals designed to accomplish this goal:

(a) A tax that would effectively increase the price of residential heating fuel by $1,

(b) A subsidy that would effectively reduce the price of natural gas by $3, or

(c) A tax that would effectively increase the price of electricity (produced by hydroelectric facilities) by $4. To assist you in your decision, an economist in your office has estimated the demand for residential heating fuel using a linear demand specification. The regression results are presented as follows. Based on this information, which proposal would you favor? Explain.

 

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