Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Microeconomics Expert

GROUP A
problem1)

An agent has a utility function over goods 1 and 2 of the form U= X1c X2d, where c is your individual number and d is your minimum number. The agent’s income is equal to your 2-digit number. The price of good 1 is your maximum number and the price of good 2 is your median number. Derive the agent’s demand functions for good 1 and good 2. find out the quantities of good 1 and good 2 in the agent’s optimum bundle.

problem2)

An agent has a utility function over goods 1 and 2 of the form U= X1c X2d, where c is your 1- digit number and d is your minimum number. The agent’s income is equal to your 2-digit number. Initially, the price of good 1 is your median number and the price of good 2 is your individual number.
Let the price of good 1 change to your maximum number. For good 1, determine for this price change the
a) total price effect
b) the substitution effect
c) the income effect

problem 3)

For the same problem you analysed in problem 2, find for that price change the
a) Laspeyres measure of the welfare change
b) Paasche measure of the welfare change
c) compensating variation
d) equivalent variation

GROUP B

problem 4)

a) Consider the problem you analysed in problem 2. Instead of the income value you used there, allow the agent to have an endowment of good 1 equal to the first digit of your 2- digit number, and an endowment of good 2 equal to the second digit of your 2-digit number. Derive expressions for the ordinary demands for both goods and find out the gross and net demands for each good.

b) An agent has a utility function over wealth given by U= W.5/c where c is your 1-digit number. Their wealth if not robbed is equal to your 2-digit number multiplied by 1000. Should they be robbed, their wealth will be your maximum number multiplied by 1000. They assess the probability of being robbed as 1/(median number x 10). How much would this agent be prepared to pay for full insurance? How much would they have to pay for full (actuarially) fair insurance?

problem 5)

Consider the two agents, A and B.

• Agent A has the utility function UA= X1c X2d where c is your minimum number and d is your median number. A’s endowment of good 1 is the first digit of your 2-digit number, and A’s endowment of good 2 is the second digit of your 2-digit number.
• Agent B has the utility function UA= X1c X2d where e is your maximum number and f is your 1-digit number. B’s endowment of good 1 is the second digit of your 2-digit number, and B’s endowment of good 2 is the first digit of your 2-digit number.
• The price of good 2 is your 1-digit number.

a) Find the equilibrium price for good 1 and the gross and net demands of both agents for goods 1 and 2.
b) Repeat the analysis for the cases where

i. the values of c and d are swapped for A, and e and f are swapped for B.
ii. the endowments of goods 1 and 2 are swapped for A, and the endowments of goods 1 and 2 are swapped for B [with c, d, e, f at their original – i.e part a) values].

problem6) Consider the two agents, A and B. Each can choose one of two strategies, 1 and 2. The payoffs for the various outcomes are illustrated below (A’s payoffs listed first in each cell):
                                                                   Player B
                                                    Strategy 1            Strategy 2

  Player A            Strategy 1            3.5, b                   c, 2.5

                           Strategy 2             e, f                      g, 1.5

where:        
• b is your individual number
• c is your 1-digit number
• e is your median number
• f is the first digit of your 2-digit number
• g is the second digit of your 2-digit number

a) Assume that A and B act simultaneously. Find all equilibrium strategy combinations of this game, including, where appropriate, mixed-strategy equilibria. Show A and B’s equilibrium payoffs.
b) Reprepare this game in extensive form. Determine the equilibria and payoffs for the case in which A moves first, and the case in which B moves first.

GROUP C

problem7)

Consider a market in which all output is produced by two firms, A and B. The market inverse demand curve is given by P= a-bQ where a is your two-digit number x 10 and b is your individual number. Both firms have a constant marginal cost equal to your median number.
a) Find the Cournot equilibrium outputs for firms A and B, the equilibrium market price and the equilibrium profit for each firm.
b) Repeat for
i. the case where the marginal cost of firm B is constant and equal to your maximum number.
ii. The case where there are n firms with marginal cost equal to your median number. Find the output of each firm, the market price and each firm’s profit, where n is the sum of your individual number and your median number. [Hint: with identical costs each firm’s output will be the same].
iii. The case where there are two firms A and B and the marginal cost for firm A is mAQA (where mA is your minimum number) and the marginal cost for firm B is mBQB (where mB is your 1-digit number).

problem8). Consider a market in which all output is produced by two firms, A and B. The market inverse demand curve is given by P= a-bQ where a is your two-digit number x 10 and b is your individual number. Both firms have a constant marginal cost equal to your median number.
a) Find the Stackelberg equilibrium outputs for firms A and B, the equilibrium market price and the equilibrium profit for each firm, on the assumption that firm A is the leader and firm B is the follower.
b) Repeat for
i. the case where the marginal cost of firm B is constant and equal to your maximum number.
ii. The case where there are two firms A and B and the marginal cost for firm A is mAQA (where mA is your minimum number) and the marginal cost for firm B is mBQB (where mB is your 1-digit number).
iii. The above two cases on the assumption that B is the leader and A the follower.
problem9)

Consider a market a market for used cars in which cars can be either high-quality or lowquality. The demand for both types of car is perfectly elastic. The price buyers are willing to pay for a car known to be of low quality is your individual number x $2000 and the price they are willing to pay for a car known to be of high quality is your maximum number x $4000. Sellers are willing to accept a price equal to your minimum number x $1000 for a car known to be of low quality, and to accept a price equal to your median number x $3750 for a car known to be of high quality. The number of cars available for potential sale is equal to your 2-digit number x 200. The number of high-quality cars in that group is equal to your maximum number x 100. The supply of both cars is perfectly elastic up to the quantity of cars available.

What will be the outcome in the market in terms of the prices and quantities of cars of each type sold, the welfare gains from trade, and how those gains are distributed, is each of the following cases:
a) Information on quality is complete and symmetric.
b) Information on quality is zero and symmetric, and both buyers and sellers have the utility function U=V, where V is wealth.
c) Information on quality is complete for sellers but zero for buyers, and buyers have the utility function U=V.
d) Information on quality is complete for sellers but zero for buyers, and buyers have the utility function U=c ln v, where c is your 1-digit number.
For cases c and d above, find the maximum value of the sellers’ valuation of good-quality cars (given your original value of θ) that would allow a market for good-quality cars to exist. For the original sellers’ valuation of good cars find the minimum value of θ that would allow a market for good-quality cars to exist.

If the sellers of good quality cars in cases c and d were able to spend $18000 on a certification process that buyers regarded as 100% credible, would they do so? If not, what would be the maximum amount they would be willing to pay?

problem10) Consider a good for which production generates external costs. Let the marginal external cost function be MEC=aE, where a is your 1-digit number, and E the quantity of emissions. The pollution can be abated at a cost. Let the marginal cost of abatement function be MCA=B-cE, where B is your 2-digit number and c is your median number.
a) Find the socially optimal level of emissions, and the optimal value of abatement costs and external cots.
b) If an emission fee were levied on producers, what would be the deadweight social loss associated with setting the fee at 90% of the correct value?
c) If an emission standard were enforced, what would be the deadweight social loss associated with setting the standard at 110% of the correct value?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9457

Have any Question? 


Related Questions in Microeconomics

Question economists say that there is a difference between

Question: Economists say that there is a difference between economic profit and accounting profit. What do you think that difference is? Begin by defining the concept of opportunity cost. The response must be typed, sing ...

Question electric utilities in california often make

Question: Electric utilities in California often make exchanges of power with utilities in the Pacific Northwest because their time patterns of consumption differ. California peaks in summer to meet air conditioning load ...

Question investors sometimes fear that a high-risk

Question: Investors sometimes fear that a high-risk investment is especially likely to have low returns. Is this fear true? Does a high risk mean the return must be low? The response must be typed, single spaced, must be ...

Question specialized bits costing 50000 used in the mining

Question: Specialized bits (costing $50,000) used in the mining industry have a useful life of 5000 hours of operation and can be traded in when a new bit is purchased for 10% of first cost. The drilling machine that use ...

Question using the small open economy model illustrate and

Question: Using the small open economy model, illustrate and describe the likely effects of an economic crisis on a country's trade performance and balance of payments? The response must be typed, single spaced, must be ...

Question in june of 2009 the us house of representatives

Question: In June of 2009 the U.S. House of Representatives passed H.R. 2454, which introduced a "cap-and-trade" system to reduce carbon emissions associated with global warming. The federal government will issue a fixed ...

Question in the example from the exchange without

Question: In the example from the Exchange Without Production section, construct a different series of trades among the five people and show that it leads to the same equilibrium price and the same allocation of the good ...

Question break into teams and identify four reasons that an

Question: Break into teams and identify four reasons that an international airline such as Southwest or Delta would invest in a project when its direct analysis using both payback period and net present value indicate it ...

Question - consider a market with two platforms old and new

Question - Consider a market with two platforms, "old" and "new", that connect between a buyer and a seller. Suppose that if the buyer and the seller join the same platform, the buyer's payoff is 10 and the seller's payo ...

Question unions and productivity in some industries the

Question: Unions and productivity In some industries, the labor productivity of union workers exceeds the labor productivity of nonunion workers. Which of the following might help explain the higher productivity of union ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As