Questions 1, 2 & 3 involve the following situation:
1.The demand for coal lumps is given by the following: p=140-0.5*Q. The private marginal cost of coal lumps is given by the following: MC=20+0.5Q. In addition, there is an external cost of coal lumps (E) to residents who live near the coal mine where E=0.5Q.
The socially optimal level of coal production is:
40.
80.
120.
180.
none of the above.
2.If the market for coal lumps is competitive, the deadweight loss to society is equal to:
0.
600.
1200.
2400.
None of the above.
3.A Pigouvian tax of _______ on coal production will ensure the efficient outcome is achieved:
$40.
$60.
$90.
$135.
None of the above.
4.Consider the following game. Jerry and Kerry are roommates who must make decisions about cleaning. Jerry's payoff is the first number in each cell and a higher number is a better outcome:
Kerry
Clean Don't clean
Jerry (6,2) (2,3)
(8,4) (4,2)
Both Jerry and Kerry have a strictly dominant strategy.
This game has no Nash equilibrium.
This game has a single Nash equilibrium.
This game has more than one Nash equilibrium.
Both Jerry and Kerry have a strictly dominant strategy.
both b and d are correct.
5.A monopolist faces a demand curve given by Q=120-2p and has constant marginal (and average cost) of 20. What is the economic profit made by this profit-maximising monopolist if they engage in perfect price discrimination?
0
800
1600
3200
None of the above
6.A single price monopolist which is producing at the profit maximising point decides to increase its prices by 1%. We expect quantities sold to:
decrease by more than 1%.
decrease by less than 1%.
increase by more than 1%.
increase by less than 1%.
There is not enough information to answer the question.
7.Bob has a demand curve for public broadcasting (G) given by G = 12 - 0.5p. Similarly, Christine has a demand curve given by the following: G = 12 - 2p. Assume that the marginal cost of providing every hour of broadcasting is equal to 8. In a competitive equilibrium the number of hours supplied equals:
2.
3.
5.
6.
8.
8.Bob has a demand curve for public broadcasting (G) given by G = 12 - 0.5p. Similarly, Christine has a demand curve given by the following: G = 12 - 2p. Assume that the marginal cost of providing every hour of broadcasting is equal to 8. The efficient number of hours supplied equals:
4.
8.8.
10.
11.2.
12.
9.Two shops in Newtown, "Bob's Kebabs" and "Jose's Pies", 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 $16. The payoff matrix is given by:
Bob's kebab
Hire Dont hire
jose's pies hire (4,4) (-4,16)
dont hire (16,-4) (0,0)
In the Nash equilibrium:
A guard will be hired.
No guard is hired.
One store hires the guard and both benefit from the presence of the guard.
Neither player has a dominant strategy and there is no Nash equilibrium.
More information is required to answer the question.
10.Assume that individuals are homogeneous and that each has a demand curve of the following form for internet service: p=100-2q where p is the price per hour and q is hours per month. Assume the firm has a constant marginal cost of $8. The profit maximising two-part tariff results in the firm selling ______ hours and receiving total revenue of ________ from each consumer:
8: 64.
23: 2116:
23: 2116.
46: 2484.
92: 2484.