--%>
Assignment Help - homework help

problem on Legislature budget

XY School District has a large number of students in need of remedial instruction. The superintendent of XY School System can allocated her budget between purchasing X units of remedial instruction at a price of $2,000/unit and spending an amount ($Y) on all other school activities.  (For the purposes of this problem, assume that “all other school activities” can be viewed as a composite commodity with a per-unit price of $1,000.)  The Superintendent has a budget of $800,000, raised through local taxes, to allocate between the two activities.

The State Legislature is considering ways to induce XY County to purchase more units of remedial education for underachieving students. It is specifically considering various forms of grants.

1. Budget Constraints:

a. Draw and label Superintendent’s budget line with no State aid (Make sure to put units of remedial instruction on the horizontal axis)

b. Assume the Superintendent chooses to purchase 100 units of remedial instruction and 600 of “other school activities. Label this is allocation as point “K” on your diagram

2. Open-Ended Matching Grants:

a. One option for the State is an open-ended matching grant, under which the state would match XY School District one-for-one every dollar the District spends on remedial instruction. Draw and label the superintendent’s new budget constraint under this program (you should draw this new budget line on the same graph you produced in #1 above)

3. Close-End Matching Grants:

a. A legislator, fearing school districts will respond so aggressively to the subsidy for remedial instruction provided by the matching grant that it will be too costly, proposes that the matching grant program be closed-ended, such that no district can receive more than $100,000 of state aid.  Draw and label the Superintendent’s budget constraint under this closed-end matching grant program (You should draw a new budget line, using the same chart from #1 and #2 above)

b. As a legislator interested in increasing remedial education services, do you think making the matching grant closed ended will lead XY County to provide fewer units of remedial education than if the matching grant were open ended?  Explain.  (Hint, think about income and substitution effects).

   Related Questions in Business Economics

  • Q : Describe advertising costs or

    Advertising costs or persuasive advertising: When the expenses incurred by a find to persuade the potential consumer to present their brands or products as different or better compared to another brands or products is termed as advertising costs or pe

    		•
  • Q : Favor laissez- faire economic policies

    Favor laissez- faire economic policies tended by Adam Smith, who also: (w) saw the requirement for several state intervention. (x) believed there were no conditions in which the government must intervene. (y) supported most government

    		•
  • Q : Resource market for economic capital

    Janet has loaned a start-up coffee house $50,000 and predicts to earn interest from her financial investment. In circular flow model this transaction is an illustration of: (1) An exchange of her saving for interest, via a resource market for the economic capital. (2)

    		•
  • Q : High-convexity portfolios outperform

    An important drawback of "traditional yield spread analysis" is the "failure to take into account future interest rate volatility that would affect the expected cash flow" of a fixed income security. How does option adjusted spread analysis correct for the "failure" of traditional yield spread analy

    		•
  • Q : Demand supply Newspaper item: “Due to

    Newspaper item: “Due to lower grain prices, consumers can expect retail prices of choice beef to begin dropping slightly this spring with pork becoming cheaper after midsummer,” the Agriculture Department predicted. “This reflects increasing supply,” the department said. Does the statement use th

    		•
  • Q : Calculate Equilibrium Quantity and Price

    1. The owner of a firm calculates that next year's profit will be $1,000. Each successive year profit will increase by 10% (i.e. year 2: $1100; year 3: $1210 and so on.) At the end of the 5th year the firm could be sold for $20,000. A) if the appropriate di

    		•
  • Q : Major implication of invisible hand of

    The major implication of Adam Smith’s conception of an “invisible hand” was such that: (w) pursuit of individual self interest must be controlled. (x) most people lose sight of what’s good for society. (y) most

    		•
  • Q : Elucidate how Personal income tax is a

    Elucidate how Personal income tax is a major source?

    		•
  • Q : Change in supply and a change in the

    Distinguish between a change in supply and a change in the quantity supplied?

    		•
  • Q : When productive resources are utilized

    While productive resources are utilized efficiently: (w) prices greatly exceed production costs for current outputs. (x) opportunity costs are at their minimums for all goods. (y) domestic production exceeds the value of foreign output. (z) the value

    		•