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Without government intervention, what would be the equilibrium amount of chocolate produced? What is the socially optimal amount of chocolate production?
Why would a toll charge of $5 per vehicle lead to an economically efficient amount of traffic?
Explain how costless bargaining will lead to a socially efficient outcome, regardless of whether the property rights are owned by the community or the producer.
Provide an argument that the Coase Theorem holds in this situation. Provide an argument that the Coase Theorem holds in this case.
What would the Coase Theorem imply about the outcome of bargaining between the town and the factory owner?
If the socially efficient level of backhoes is Q* =12, find the tax that induces the socially efficient level of backhoes in equilibrium.
A chemical producer dumps toxic waste into a river. The waste reduces the population of fish, reducing profits. Why might bargaining not be costless?
The prices are measured in $ per unit. Suppose the marginal cost of producing the public good is $10 per unit. What is the efficient level of the public good?
Assuming the marginal cost of a concert is $2800, what is the efficient number of concerts to offer each year?
Draw a graph illustrating why the amount of traffic is higher than the efficient level during a period of peak demand when there is congestion.
Can all of the allocations be Pareto optimal? If not, explain why not. If so, give an example.
Show that George wants to buy ale at any lower price and wants to sell ale at any higher price.
Suppose the marginal cost of public broadcasting is MC = 15. What is the economically efficient level of public broadcasting?
Draw an indifference curve for George and an indifference curve for Harriet, both tangent to the budget line, such that George wants to buy ale.
Show how the profits of the fishery change through time as the fishery adjusts to its new steady state.
What would happen to this smallest value of q if the insurance company were to raise the insurance premium from $5,900 to $27,500?
Discuss the difficulties that the insurance company might face in offering this type of policy.
Draw a decision tree reflecting the decisions the firm can make and the payoffs from those decisions.
Your profit from winning the auction is profit = (200 - bid) × probability of winning. Show that your profit maximizing strategy is bidding half of your valuati
Under what circumstances would a general equilibrium analysis be more appropriate than a partial equilibrium analysis?
Explain what would happen to the price in market X if the supply of good Y increased (i.e., if the supply curve for good Y shifted to the right).
What role does consumer utility maximization play in general equilibrium analysis? What role played by firm cost minimization in a general equilibrium analysis?
What is an economically efficient allocation? How does an economically efficient allocation differ from an inefficient allocation?
What is the marginal rate of transformation? How does the marginal rate of transformation relate to the production possibilities frontier?
What is comparative advantage? What is absolute advantage? Which of these two concepts is more important in determining the benefits from free trade?