--%>
Assignment Help - homework help

Problem on Infrastructure

The state legislature has voted to develop a grant-in-aid policy to try and induce local communities to devote more resources to improving their infrastructure.

Town O = Has an operating budget of $2 million; currently spends a total of $60,000 on infrastructure
Town M = Has an operating budget of $1 million; currently spends a total of $10,000 on infrastructure

Assume that for each community:

• The price for a unit of infrastructure (I) = $1
• The price for a unit of any other good (AOG) = $1

The state is considering is providing each community with a $40,000 non-matching, categorical grant that can be used only for infrastructure. Predict how this grant would affect the total amount of money Town O spends on infrastructure. 

In your answer, be sure to show in a clearly labeled diagram for Town O only: (a) the original budget line (without grant); (b) the original spending on infrastructure and AOGs without grant; (c) the new budget line (with grant); (d) the range of plausible values for Town O’s spending on infrastructure after the grant.

   Related Questions in Business Economics

  • Q : How demand is influenced by price

    Describe how the demand for a good is influenced by the price of its associated goods. Give illustrations.

    		•
  • Q : Type of expenditure at the local level

    What is the most important source of revenue and the major type of expenditure at the local level?

    		•
  • Q : Fruit Question: Read the following

    Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:

    Q : Describe the Promoting stability

    Describe the Promoting stability?

    		•
  • Q : Society material wants are scarce

    Explain the foundation of economics where society’s material wants are scarce resources?

    		•
  • Q : Neoclassical and heterodox production

    One of my friends can't discover the answer of this question. Give solution of this question. Neoclassical production and cost theory is more realistic than and cost theory and heterodox production. Discuss.

    		•
  • Q : Main advantage of EVA The main

    The main advantage of using EVA is that it is simple to calculate and understand. It uses simple measures like operating profits and cost of capital terms which are widely known and accepted in the financial arena. It helps the managers to assess thei

    		•
  • Q : Illustrate Scarcity and choice of

    Illustrate Scarcity and choice of Economic Perspective?

    		•
  • Q : Importance of rationally optimal

    Economic scarcity is pervasive, that makes choices essential. Therefore, rationally optimal decisions hinge upon tradeoffs which essentially reflect: (i) cooperation to minimize human greed. (ii) opportunity costs. (iii) competitive social behavior. (

    		•
  • Q : Describe North American Free Trade

    Describe North American Free Trade Agreement (NAFTA)?

    		•