Question

Directions: Due in class on Tuesday, January 29. All answers should be typed. 1. (5 pts each) Suppose you are tasked with analyzing the following statements by a policymaker. Which variable would be exogenous and which would be endogenous? a) Government spending on assistance programs for the elderly increases the quality of life in older age. b) Graduating from college during a recession lowers your life-long stream of income. c) Students that spend a lot of time on their phones during lectures typically do worse on exams. 2. (5 pts each) Suppose the DJ of a radio station has six concert tickets to split between four winners of their annual costume contest. The utility of each consecutive concert ticket for each person is given below (e.g., the first ticket allows the person to go to the concert and the second, third and fourth tickets could be given to their friends). The DJ is a utilitarian. Utility per ticket Mike Jon Trey Page lst 2nd 3rd 4th 555 333 700 500 85 85 500 85 60 7585 80 50 65 70 75 a) Notice each person gets the most utility from the first ticket and each extra ticket yields a little less utility. What economic concept does this reflect? b) How would a utilitarian DJ distribute the six tickets? c) If instead, Jon received 800 units of utility from the first ticket, how would this change the optimal utilitarian distribution? 3. (5 pts each) In the table below, consider four societies with four people of differing

Answer 1

question 1 ) Exogenous variable are determined outside the model while endogenous variables are determined in the model i.e these variables are determined because of the exogenous variables .

Government spending on assistance program is an exogenous variable while effect on quality of life of elderly people is an endogenous variable.

Graduation from college during recession is an exogenous variable while life long income is an endogenous variable since the college from which you graduate affects the income

Time spent by students on phone : exogenous variable as it is influenced by outside factors

scores attained in exams : endogenous variable as time spent on phone is affecting their values

(answered 1 question as per policy )