1. The demand for coal briquettes is given by the following: p=200-0.5*Q. The private marginal cost of coal briquettes is given by the following: MC=20+0.5Q. In addition, there is an external cost of coal briquettes (E) to residents who live near the coal mine given by the following: E=Q.
If the market for coal briquettes is competitive, the deadweight loss to society is equal to:
a. 0
b. 4500
c. 8100
d. 9000
e. None of the above
2. Consider the following game. Roger and Jemima are roommates who must make decisions about cleaning. Roger's payoff is the first number in each cell and a higher number is a better outcome:
a. This game has no Nash equilibrium.
b. This game has a single Nash equilibrium.
c. This game has more than one Nash equilibrium.
d. Both Roger and Jemima have a strictly dominant strategy.
e. Both b and d are correct.
3. Assume that there is a world price for corn and that the domestic market has the usual downward sloping demand curve and upward sloping supply curve. Which of the following statements is true for a country that exhibits an absolute disadvantage in the production of corn?
a. The country will import corn and consumer surplus will increase relative to the no trade situation.
b. The country will import corn and producer surplus will increase relative to the no trade situation.
c. The country will export corn and consumer surplus will increase relative to the no trade situation.
d. The country will export corn and producer surplus will increase relative to the no trade situation.
e. More information is required.
4. Two shops in Newtown, "Artisan Pens" and the Thrift Shop, are deciding whether to hire a security guard. The security guard represents a public good in that the guard will provide deterrence to both stores. The cost of hiring a guard is $20 in total or $10 per store if the cost is shared. Each store will benefit from the presence of a security guard by reducing theft by $12. The payoffs for the Thrift Shop are shown first in each cell. If the payoff matrix is given by:
In the Nash equilibrium:
a. A guard will be hired.
b. No guard is hired.
c. One store hires the guard and both benefit from the presence of the guard.
d. Neither player has a dominant strategy and there are no Nash equilibrium.
e. More information is required to answer the question.
5. Suppose individuals A and B have the following demand curves for a public good: QA = 40 - 2p and QB = 40 - p, where Q is the amount of the public good.If the marginal cost of production is constant and equal to 30, the quantity produced in the competitive equilibrium would equal ____ and the efficient outcome is equal to ____:
a. 0,10
b. 10,10
c. 10,20
d. 10,30
e. None of the above
6. Assume that the domestic demand for cars is given by Qd=8000-2P and the domestic supply of cars is given by Qs=P-1000. The price of cars on the world market is $2000.
The deadweight loss from not engaging in international trade is equal to:
a. 0
b. 1,500,000
c. 3,000,000
d. 5,000,000
e. None of the above
7. Free to air television (FTA) is a pure public good that is consumed by two individuals, Gordon and Desmond. Gordon has a demand for FTA given by the following: q=25-0.5p. Desmond has a demand curve for FTA given by the following: q=30-p. If the constant marginal cost of producing FTA is $40, in a competitive market the quantity of television would be ____ while the efficient quantity of FTA is equal to _____;
a. 5 ; 10.
b. 10 ; 20.
c. 5 ; 5.
d. 10 ; 15.
e. none of the above.
8. The government is considering removing a quota on the import of lithium batteries. The domestic demand curve is given by Q=90-p. The domestic supply curve is P=30+0.5Q. The world price for lithium batteries is $40. If the quota is set for 20 units, what is the deadweight loss from the quota?
a. 0
b. 16.67
c. 40.33
d. 150
e. None of the above