This follows on from the earlier questions about the project to generate electricity.

Ch.7

4. What would be the cost to the economy of the project's use of the skilled technicians if their training attracted a government subsidy that, over their working life, reduced the wage they received by 4 per cent.  Use a diagram and/or the Harberger equation to assist you in these calculations.

 

5. Consider a coal-mining project that will increase coal supply by 1 million tonnes per annum in a country where the domestic price of coal is fixed at $60 per tonne.

Current demand in the country concerned is estimated to be 20 million tonnes, but supply is only 12 million tonnes.  The black market (or free market) price for coal is $100 per tonne, and is expected to fall to $95 per tonne as a result of the additional supply from the new mine.  Estimate the economic benefits of the new project in these circumstances.