Question 1:
a) If Canadian government redistributes income from rich to the poor, it will achieve equity as overall income gap will fall in the economy while it will lower efficiency as it will reduce incentive for rich people to work and lower the overall growth of income.
b) Transmission cost = $600
i) If the car value is $6,500 if transmission works and $5,700 if it does not work. It means new transmission raise your car value by $800 and transmission cost $600 result in overall benefit of $200. Thus you should get it repaired.
ii) If the car value is $6,000 if transmission works and $5,500 if it does not work. It means new transmission raise your car value by $500 and transmission cost $600 result in overall loss of $100. Thus you should not get it repaired.
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