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3. The price of Appalachian coal is currently $80 per ton.

a. If the discount rate is 5%, what do we expect the price of coal to be next year?
JULICAL WOR! The price of Appalachian coal is currently $80 per ton. a. If the discount rate is 5%, what do we expect the pri
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Answer #1

Current market price = $ 80 per ton

A. Discount rate = 5% per year

After a year the price of coal will increase by 5%. The price will increase at the same rate with which the value of money is changing. Therefore, the future price of coal will be

P1 = P.(F/P,1%,n)

Pi = 80 x (1 +0.05)

P1 = $ 84 per ton

Price after one year = $ 84 per ton.

B. After the congress imposes a tax on coal the supply curve shifts leftwards then the quantity demanded decreases and the equilibrium price increases.

Refer the attached picture it is just for reference, in question it is not asked to draw graph.

S2 = S1 + Tax S1 Price $ Consumer Burden Tax Producer burden 80 88 Quantity

Please contact if having any query will be obliged to you for your generous support. Your help mean a lot to me, please help. Thank you.

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