True or False....
1. In the formula for Bayes theorem if the w-probability is greater than the zero than the a-probably is less than the b-probability
2. if people drop out of the labor force because they stop looking for jobs, then the unemployment rate will rise.
3. running the price clock in a dutch auction once will produce higher observed prices compared to running the clock twice
4. if losers pay winners in a sealed bid auction then they will eventually be willing to bid up to 75 percent more than the winning prize
5. with only one seller in a posted offer market prices will tend to move upward toward the monopoly price
6. adjusting the concentration of sweet versus sour enabled rats to have a large negative income effect for sour water
7. a sales tax on large luxury boats will impact the buyers more than the sellers of these boats causing the buyers to pay more than half the cost of the sales tax
8. if each seller knew all of the sellers unit costs and the buyers knew all of the buyers unit values a buyer or seller would be able to calculate the competitive equilibrium price before an experiment began
9. suppose your income taxes rise only on incomes over 250,000 annually then your after tax income will be unafftected if your annual income is 100,000
Essay Questions...
1. a)Explain what happens to observed prices posted offer and double auction markets as the number of sellers drops to 2. b) Explain what happens in these two markets as the number of sellers drops to only one seller. c) Explain why part (b) illustrates the first experimental principle.
2. Draw the appropriate diagram and use it to explain the logical steps to explain how positive price effects can happen.
3. Construct from the information below a diagram of market demand and supply schedules, and the competitive equilibrium price interval
Seller Unit CostBuyer Unit Values
1st 2nd 1st 2nd
1 103 130 1 149 121
2 107 119 2 145 117
3 115 123 3 141113
4 127 131 4 137125
5 135 138 5 133 109
6 111 135 6 129 105
Recall the looser pay winner auction experiment done in class. (a) Discuss how these experiments explain why the bidders changed their minds towards wanting to bid well above the value of the prize, even though they refused to do so at the beginning. (b) Discuss how the experiment explains why George Bush and many citizens changed their minds about a "preemptive" attack on Iraq. (c) also explain why England wanted to tax trade in the American colonies, which led to rebellion and the formation of the United States.