Explore BrainMass
Share

Explore BrainMass

    Discount Rate

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Question1: The EPA is interested in implementing a policy to increase the
    amount of "brownfield" remidiation. Each policy possesses separate benefits
    listed below (attachment) over a 5 year horizon. Cost of implementation is
    10 million. Which policy would you recommend with a discount rate of 20%?

    (see attachment)

    Question 2: Calculate the marginal utility (for x and y) and the marginal
    rate of substitution for the following utility functions:

    1.) U(X,Y) = 4*X^0.3Y^0.5

    (i just need one done to figure it out)

    Question 3: Solve the following problems using the Lagrangian optimization
    criterion to determine the optimal consumption of goods x and y and utility
    derived from their consumption.

    1.) U(x,y) = 8x^0.5y^0.25 Px = 4 Py = 2 I =$40

    Lagrangian Formula: U(x,y) + lambda[I-PxX-PyY].

    © BrainMass Inc. brainmass.com October 9, 2019, 5:50 pm ad1c9bdddf
    https://brainmass.com/economics/macroeconomics/discount-rate-overview-69608

    Attachments

    Solution Preview

    See the attached file.

    Question1: The EPA is interested in implementing a policy to increase the amount of "Brownfield" remediation. Each policy possesses separate benefits listed below over a 5 year horizon. Cost of implementation is 10 million. Which policy would you recommend with a discount rate of 20%?

    Policy 1: Total benefits over 5 years = 10+6+4+3+2 = 25m
    Total benefits after discount = 0.80*25m = 20m
    Profit = 20m - 10m = ...

    Solution Summary

    The solution calculates the marginal utility (for x and y) and the marginal rate of substitution.

    $2.19