8 Micro questions
I must receive a high B or an A on this assignment. Each question has three attempts, the same question is not used in the new attempts, you will send me your first round of answers, I will plug them in, make sure they are correct, if the grade is high enough you will not have to do any other attempts, if not, I will send you the second attempts etc.
I will send ALL graphs when a tutor is chosen.
1) If a good is nonexcludable, that means:
a) those who are unwilling or unable to pay for the good do not obtain its benefits
b) it is not possible to prevent an individual from using the good
c) the satisfaction derived from consuming the good is affected by the price a consumer pays for the good
d) one person’s benefit from the good does not reduce the benefit available to other people
e) consumption of the good by one person decreases the ability of other people to consume the good.
If a good is rival, that means:
a) the satisfaction derived from consuming the good is affected by the price a consumer pays for the good
b) consumption of the good by one person decreases the ability of other people to consume the good
c) it is not possible to prevent an individual from using the good
d) one person’s benefit from the good does not reduce the benefit available to other people
e) those who are unwilling or unable to pay for the good do not obtain its benefits
If a good is both nonexcluable and rival, than it is ____________ (a commons good, a club good, a private good, a public good).
2) Determine whether the following good is a private good, a public good, a commons good, or a club good.
A large, beautiful statue in a town square is _________ (a club good, a private good, a commons good, a public good).
3) Terese gives tap-dancing lessons late at night in her room on an upper floor of a densely populated dormitory. The dancing involved loud tapping on the floor. Which of the following is true:
a) this will generate a negative externality
b) this will generate both positive and negative externalities
c) this will generate a positive externality
d) this will not generate any externalities
4) Parks confer many external benefits on society: open space, trees that reduce pollution, and so on. Therefore, the private equilibrium quantity (market quantity) of parks is not equal to the social equilibrium quantity.
Graph 1 shows the private demand for parks, the private supply of parks, and the social demand of parks, incorporating both private benefits and external benefits. Use a black point to indicate the private equilibrium quantity (market quantity). Next, use a purple point to indicate the social equilibrium quantity.
*Graph 1*
5) A small community is located near a bay. There are five people in the community, each of whom has accumulated savings of $1,000. Each person can either buy a fishing boat and sell the fish they catch in the bay (assume the boat does not depreciate over time), or buy a savings bond that pays 13% interest. Thus, someone who chooses not to buy a boat will earn $130 of income each year.
Fish sell for $10 per pound. The more people who choose to fish in the bay, the fewer fish each will catch. The total number of fish caught and the total value of the fish caught by each person are shown by Table 1.
*Table 1*
Suppose that of the give villagers, two (Spenser and Nicholas) say they are definitely going to buy boats and fish, and two (Cecilia and Steve) say they are definitely going to buy savings bonds. The fifth, Jennifer, is undecided.
If Jennifer chooses to buy a boat and fish, she will earn ______ (less, more) than the $130 she could get from investing her money in a savings bond.
Suppose two fishing boats (Spencer’s and Nicholas’s) are in the bay, while Cecilia and Steve purchase savings bonds. Fill in the income columns for when Jennifer decides to fish and for when she invests her money in a savings bond.
*Table 2*
Table 2 Options:
Invest/Spencer & Nicholas:$320, $340, $280, $300
Invest/Jennifer: $130, $160, $140, $150
Invest/ Total income: $700, $690, $680, $710
Buy/Spencer & Nicholas: $280, $300, $340, $320
Buy/Jennifer: $150, $140, $130, $160
Buy/Total income: $710, $700, $680, $690
If Jennifer were to buy a boat and fish, the total income earned by all residents of the community would ______ (increase, decrease).
The socially optimal number of boats can be found by looking at the marginal (community-wide) revenue from each additional boat in the bay and comparing it to the opportunity cost of buying the boat. Recall that the marginal revenue is the additional revenue created from having one more boat in the bay, and the opportunity cost of buying the boat is the income received from investing the money in a savings bond.
*Table 3*
The socially efficient number of fishing boats is _____ (1, 3, 4, 5, 2) boats.
Suppose the bay is on Jennifer’s property, so she can legally charge people to fish in it. If Jennifer chooses not to buy a boat, Spencer and Nicholas will be willing to pay at most _________ ($160, $10, $30) each to fish in her bay, and she will earn an income of at most _______ ($190, $160, $290). If she does buy a boat and fish, Nicholas and Spencer will be willing to pay at most _________ ($30, $160, $10) each to fish in her bay, and she will earn an income of at most _________ ($160, $290, $190).
If Jennifer is able to charge the highest price Nicholas ans Spencer are willing to pay, Jennifer maximizes her income if she buys a _________ (boat, savings bond) and sells fishing rights to Nicholas and Spencer.
If the bay is held as private property rather than commonly held by all the residents of the community, the socially optimal number of boats ________ (will, will not) be bought.
6) Rajiv would like to buy a used banjo, but he is not an expert on instruments and, thus, cannot assess the quality of the banjo directly without playing it for an extended period. Rajiv believes that owners who have not taken proper care of their banjos are more willing to sell than owners who have maintained their banjos well. Because of this, Rajiv believes that banjos up for sale are probably of low quality.
Which of the following economic problems is characterized in the story?
a) adverse selection
b) signaling
c) moral hazard
d) screening
7) Present owners of a network good receive ________ (less, greater) benefits as new buyers purchase the good.
True or False: the market always leads to the adoption of the most efficient technology.
8) Carbon dioxide emissions have been linked to increase air pollution.
Match the public policy to the type of public policy:
Public Policy: Since frees take carbon dioxide out of the air and convert it to oxygen, the government funds a tree planting initiative by offering $100 to any citizen who plants a tree.
a) tradeable permit system
b) corrective subsidy
c) command and control policy
d) corrective tax
Public Policy: The government orders every factory to reduce its emissions to no more than 100 tons of carbon dioxide per decade
a) tradeable permit system
b) corrective subsidy
c) command and control policy
d) corrective tax
Public Policy: The government limits total carbon dioxide emissions by all factories to one million tons per decade. Each individual factory is given the right to emit 100 tons of carbon dioxide, and factories may buy and sell these rights in a marketplace.
a) tradeable permit system
b) corrective subsidy
c) command and control policy
d) corrective tax
