FM and Fp indicate the free time enjoyed by Maaike and Pim, respectively, and G is t hey put into the working of the problem sets. plicity let us assume that G is simply the outcome of giving up free time, so the produ -n of G is simply: FG denotes the total amount of free time put in by the individuals (i.e.FG denote the total amount of time available to the individuals by W. Obviously, = FG + M
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a. Compute the Pareto efficient provision of effort.
b. Derive the decentralized provision of effort.
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- please answer all including ones that may have already been selected. Eric and Kenji are considering contributing toward the creation of a public park. Each can choose whether to contribute $300 to the public park or to keep that $300 for a cell phone. Since a public park is a public good, both Eric and Kenji will benefit from any contributions made by the other person. Specifically, every dollar that either one of them contributes will bring each of them $0.90 of benefit. For example, if both Eric and Kenji choose to contribute, then a total of $600 would be contributed to the public park. So, Eric and Kenji would each receive $540 of benefit from the public park, and their combined benefit would be $1,080. This is shown in the upper left cell of the first table. Since a cell phone is a private good, if Eric chooses to spend $300 on a cell phone, Eric would get $300 of benefit from the cell phone and Kenji wouldn't receive any benefit from Eric's choice. If Eric still spends $300…Deborah and Janet are considering contributing toward the creation of a building mural. Each can choose whether to contribute $200 to the building mural or to keep that $200 for a new sult. Since a bullding mural is a public good, both Deborah and Janet will benefit from any contributions made by the other person. Specifically, every dollar that either one of them contributes will bring each of them $0.80 of benefit. For example, if both Deborah and Janet choose to contribute, then a total of $400 would be contributed to the building mural. So, Deborah and Janet would each receive $320 of benefit from the building mural, and their combined benefit would be $640. This is shown in the upper left cell of the first table. Since a new suit is a private good, if Deborah chooses to spend $200 on a new suit, Deborah would get $200 of benefit from the new suit and Janet wouldn't recelve any benefit from Deborah's choice. If Deborah still spends $200 on a new suit and Janet chooses to contribute…2. Suppose we are considering fire hydrants in a small neighborhood. For simplicity, assume that only two individuals live in this neighborhood; Bob and Nancy. Once the fire hydrants are supplied by the city, they are automatically available to both Bob and Nancy. Thus, we can view the fire hydrants as public goods. The table below summarizes Bob and Nancy's individual marginal willingness to pay for fire hydrants. Number of Fire Hydrants Bob's MWTP $480 400 320 240 160 Nancy' MWTP $80 60 40 20 0 Suppose that one fire hydrant is provided in the neighborhood. Bob and Nancy are both being charged a municipal tax of $300 each to pay for the hydrant. Would Bob or Nancy (or both) be considered a 'free rider'? Explain your answer.
- 15. Suppose a gated housing community includes 150 identical households. It is costly to maintain the roads in the gated community. Suppose each household has a marginal benefit MB = 200 – 25M for each mile of road maintained. The total cost of maintaining roads is given by C = 20000M (MC=20000). i. If the residents have to pay individually to maintain the roads in the vicinity of their property, how many miles of roads will each household choose to maintain on their own? j. How many miles of roads should be maintained for the community considering the public good nature of roads? k. Suppose the community association could charge a flat fee to the households to fund the maintenance of the roads. How much should this fee be per household and what is the total cost of maintaining the socially efficient level of this public good? 1. Draw the individual marginal benefit curves, overall marginal benefit and the marginal cost curve. Identify and calculate the net social benefit of the public…Four individuals who live around a camp are hosting separate chirstmas parties, and all are considering purchasing aerial fireworks; any fireworks purchased will be set off over the camp, and thus will be visible to everyone at all of the parties. Karl’s marginal benefit from having an additional package of fireworks (which includes the benefit to himself and all of his guests) is given by MBK = 300 – 5Q, Jessica is given by MBJ = 600 – 10Q, Lara’s is given by MBL = 900 – 15Q, and Emily’s is given by MBE = 1,200 – 20Q, where Q is the total number of packages of fireworks set off at all parties. Each package of fireworks costs $800 (i.e., MC = 800). How many packages of fireworks will actually be set off if it is left to the free market? How much deadweight loss will result if this activity is left to the free market (as in part b)?Two firms are ordered by the Government to reduce their pollution levels. Firm A’s marginal costs associated with pollution reduction are MC = 20 + 4Q. Firm B’s marginal costs associated with pollution reduction are MC = 10 + 8Q. The marginal benefit of pollution reduction is MB = 400 – 4Q. Compare the social efficiency of the three possible outcomes: (1) require both firms to reduce pollution by the same amount;(2) charge a common tax per unit of pollution;(3) require both firms to reduce pollution by the same amount but allow pollution permits to be bought and sold.
- Consider a situation where two people are deciding (strategically) invest or not to investmoney in order to procure a public good. Each one has $500 that they can use for buyingpublic or private good. (Simply assume the additive utility form). Suppose the valuationfrom the public good is $1000 to each of them. (i) What happens when cost of procurementis $900? (ii) What happens if the procurement cost is $ 400.Which of the following statements is correct? Select one: a.In models of network goods with positive externalities, no consumption is always an equilibrium. b. The equilibrium in the hotelling model when both firms have the same location is for the firms to set their prices equal to their (constant) marginal cost even if their marginal costs are different. c. If all firms start wiht the same techonology, under both minor and drastic innovations the inovator firm is only one firm producing after the innovation. d. The Schumpeter hypothesis establishes that competitive firms have higher capacity to produce R&D than monopolies.Consider a public good, G, that is shared by Consumer A and B. Each can purchase G at the price of $20 per unit. A's marginal benefit from this public good is given by MBA-50-G. If A thinks B is getting 10 units of G, then A's optimal contribution into G will be units. On the other hand, if A thinks B is getting 20 units of G, then A's optimal contribution into G will be units. Blank # 1 Blank # 2 A/ N
- Anna and Bess are assigned to write a joint paper within a 24-hour period about the Pareto optimal provision of public goods. Let A denote the number of hours that Anna contributes to the project and B the number of hours that Bess contributes. The numeric grade that Anna and Bess earn is a function, 23 In(A + B), of the total number of hours that they contribute to the project. If Anna contributes tA, then she has (24 - A) hours in the day for leisure. Anna's utility function is UA = 23 In(A + B) + In(24 - A); and Bess' utility function is UB = 23 In(A + B) + In(24 - B). If they choose the hours to contribute simultaneously and independently, what is the Nash equilibrium number of hours that each will provide? What is the number of hours each should contribute to the project that maximizes the sum of their utilities?Taylor rehearses her singing at the dorm of her friend, Carly. Rehearsing at the dorm saves her money because it costs Php 500 per hour to rent a rehearsal space at the UP College of Music. Unfortunately, singing in the dorm disturbs Carly's neighbor, Ariana, causing her to lose sleep. The value of an hour of Ariana's lost sleep is Php 600. A. Determine whether it is socially optimal for Taylor to rehearse in the dorm. B. If UP policy states that it is illegal for Taylor to rehearse in the dorm, will Taylor end up practicing there? What can Ariana do to try to stop Taylor? C. Suppose UP policy says it is legal for Taylor to rehearse in the dorm. i. How much is Ariana willing to pay Taylor to get her to stop?Of the four cells of the table, which gives the greatest combined benefits to Van and Carlos? When neither Van nor Carlos contributes to the public park When Van contributes to the public park and Carlos doesn't, or vice versa When both Van and Carlos contribute to the public park Now, consider the incentive facing Van individually. The following table looks similar to the previous one, but this time, it is partially completed with the individual benefit data for Van. As shown previously, if both Van and Carlos contribute to a public good, Van receives a benefit of $640. On the other hand, if Carlos contributes to the public park and Van does not, Van receives a benefit of $720. Complete the right-hand column of the following table, which shows the individual benefits of Van. Hint: You are not required to consider the benefit of Carlos. Carlos Contribute Contribute $640,-- Doesn't contribute $ Van Doesn't contribute $720, -- $ If Carlos decides to contribute to the public park, Van…