Homework Answers
11) option D is correct. Competitive equilibrium quantity is determined by the intersection of marginal cost curve private and demand function. This implies that it is determined by P(Q) and MCP.
12) option B is correct because Monopoly will use the marginal revenue and marginal cost function. It will not internalize the externality due to which its marginal cost is MCP
13) option B is correct.
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MCS 11. The figure to the right shows the market with a negative externality. The competitive...
8. In a market with a monopoly that faces direct demand Q(P) = a - bP,...
8. In a market with a monopoly that faces direct demand Q(P) = a - bP, and cost function c(Q) dQ - eQ? then the firm's marginal revenue function is a. b b C. MCS MR -MCP b. a- a-2bQ d. none of the above 9. The figure to the right shows the market with a negative externality. The competitive equilibrium quantity is a. A b. B c. C d. D 10. The figure to the right shows the market...
Questions 10, and 11 refer to this game: ont Sonia Move 1 Move 2 Yuhan Move...
Questions 10, and 11 refer to this game: ont Sonia Move 1 Move 2 Yuhan Move 1 Move 2 Move 3 1, 1 -1,2 3,4 2,3 1,0 -2,1 9. In this game, a. Yuhan has a dominant strategy b. Sonia has a dominant strategy C. There are multiple Nash Equilibria d. There is only one Nash Equilibrium 10. If this was a sequential game, with Yuhan moving first, which of the following is a Subgame Perfect Nash Equilibrium a. Yuhan:...
1) A good that generates a negative externality is sold in a competitive market. Demand is...
1) A good that generates a negative externality is sold in a competitive market. Demand is defined by P(Q)=600-2Q and supply is defined by P(Q)=Q. The externality from production is E(Q)=0.5Q2. a)What is the quantity produced in the competitive equilibrium? Q= b)What is the price in the competitive equilibrium? P= c)What is consumer surplus in the competitive equilibrium? CS= d)What is producer surplus in the competitive equilibrium? PS= e)What is the total value of the externality in the competitive equilibrium?...
Unit 8 Market Failures: Externalities, public goods, natural resources The production of coffee pods results in...
Unit 8 Market Failures: Externalities, public goods, natural resources The production of coffee pods results in environmental damages when consumers throw the pods away. Currently consumers are not responsible for the costs of disposing of these coffee pods. The environmental damages caused by throwing away the coffee pods is an example of a: a Positive externality (6. Negative externality c. Private cost d. Private benefit Consider the market for coffee in the graph to the right. 1. Left unregulated, what...
Suppose we have a market with a negative externality. Market demand is Q = 18 -...
Suppose we have a market with a negative externality. Market demand is Q = 18 - P The private cost is Cp(Q) = Q and the cost of the externality is CzQ) = Q?. a. What is the marginal cost of the externality, MCg? b. What is the marginal cost to society of production MCs? c. What is the Socially Optimal quantity and price? d. Suppose the government wanted to tax a monopoly in this market with a negative externality....
6. (16 points) Suppose we realize that the market described in question 1 (Market demand is...
6. (16 points) Suppose we realize that the market described in question 1 (Market demand is still Q = 18 – P) has a negative externality. The cost function C(Q) = Q2 is private cost. We now know the cost of the externality is Ca(Q)=Q?. a. What is the marginal cost of the externality, MCE? b. What is the marginal cost to society of production MCS? c. What is the Socially Optimal quantity and price? d. How does the socially...
= 18 - 1. Suppose we realize that the market described in question 1 (Market demand...
= 18 - 1. Suppose we realize that the market described in question 1 (Market demand is still Q P) has a negative externality. The cost function Cp(Q) = { Q2 is private cost. We now know the cost of the externality is Ce(Q) = Q2. a. What is the marginal cost of the externality, MCE? b. What is the marginal cost to society of production MCs? c. What is the Socially Optimal quantity and price? d. How does the...
QUESTION 9 In a perfectly competitive labor market with freely adjusting hours, what is the value...
QUESTION 9 In a perfectly competitive labor market with freely adjusting hours, what is the value of an hour? a. more than the hourly wage b. the hourly wage c. less than the hourly wage d. the value of additional health benefits received at work QUESTION 10 The value of an input in its next best use is the: a. opportunity cost. b.explicit cost. C. marginal benefit. d. cost-benefit ratio. QUESTION 11 A good for which the price is set...
8. Which of the following is an example of a market failure? a) some goods are...
8. Which of the following is an example of a market failure? a) some goods are public (non-excludable and non-rival). b) market activities have externalities. c) insurers cannot distinguish customers who are good risks and bad risks. d) all of the above The free-rider problem means a) people will not consume a public good unless it is free. b) it is efficient to provide a public good for free." c) people treat a public good as if it were free....
19. Which of the following is not a negative externality? a. air pollution. b. high oil...
19. Which of the following is not a negative externality? a. air pollution. b. high oil prices. c. clear-cutting in forests. d. litter. 20. Which of the following types of goods is least likely to be provided by the market? a. a good that is rival in consumption and for which exclusion is possible. b. a good that is nonrival in consumption and for which exclusion is possible. c. a good that is nonrival in consumption and for which exclusion...
8. In a market with a monopoly that faces direct demand Q(P) = a - bP, and cost function c(Q) dQ - eQ? then the firm's marginal revenue function is a. b b C. MCS MR -MCP b. a- a-2bQ d. none of the above 9. The figure to the right shows the market with a negative externality. The competitive equilibrium quantity is a. A b. B c. C d. D 10. The figure to the right shows the market...
Questions 10, and 11 refer to this game: ont Sonia Move 1 Move 2 Yuhan Move 1 Move 2 Move 3 1, 1 -1,2 3,4 2,3 1,0 -2,1 9. In this game, a. Yuhan has a dominant strategy b. Sonia has a dominant strategy C. There are multiple Nash Equilibria d. There is only one Nash Equilibrium 10. If this was a sequential game, with Yuhan moving first, which of the following is a Subgame Perfect Nash Equilibrium a. Yuhan:...
Unit 8 Market Failures: Externalities, public goods, natural resources The production of coffee pods results in environmental damages when consumers throw the pods away. Currently consumers are not responsible for the costs of disposing of these coffee pods. The environmental damages caused by throwing away the coffee pods is an example of a: a Positive externality (6. Negative externality c. Private cost d. Private benefit Consider the market for coffee in the graph to the right. 1. Left unregulated, what...
Suppose we have a market with a negative externality. Market demand is Q = 18 - P The private cost is Cp(Q) = Q and the cost of the externality is CzQ) = Q?. a. What is the marginal cost of the externality, MCg? b. What is the marginal cost to society of production MCs? c. What is the Socially Optimal quantity and price? d. Suppose the government wanted to tax a monopoly in this market with a negative externality....
6. (16 points) Suppose we realize that the market described in question 1 (Market demand is still Q = 18 – P) has a negative externality. The cost function C(Q) = Q2 is private cost. We now know the cost of the externality is Ca(Q)=Q?. a. What is the marginal cost of the externality, MCE? b. What is the marginal cost to society of production MCS? c. What is the Socially Optimal quantity and price? d. How does the socially...
= 18 - 1. Suppose we realize that the market described in question 1 (Market demand is still Q P) has a negative externality. The cost function Cp(Q) = { Q2 is private cost. We now know the cost of the externality is Ce(Q) = Q2. a. What is the marginal cost of the externality, MCE? b. What is the marginal cost to society of production MCs? c. What is the Socially Optimal quantity and price? d. How does the...
QUESTION 9 In a perfectly competitive labor market with freely adjusting hours, what is the value of an hour? a. more than the hourly wage b. the hourly wage c. less than the hourly wage d. the value of additional health benefits received at work QUESTION 10 The value of an input in its next best use is the: a. opportunity cost. b.explicit cost. C. marginal benefit. d. cost-benefit ratio. QUESTION 11 A good for which the price is set...
8. Which of the following is an example of a market failure? a) some goods are public (non-excludable and non-rival). b) market activities have externalities. c) insurers cannot distinguish customers who are good risks and bad risks. d) all of the above The free-rider problem means a) people will not consume a public good unless it is free. b) it is efficient to provide a public good for free." c) people treat a public good as if it were free....
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