7. Assume five members of a voting body A, B, C, D, and E. They have ideal points in atwo-dimensional issue space, given by A: (1,4), B: (4,4), C: (2,2), D: (1,1), and E: (2,1),where the first coordinate gives a person's ideal policy on the X dimension and the secondcoordinate gives the ideal policy on the Y dimension. Assume further that each memberprefers an outcome closer to his or her ideal point to one further away. All votes are takenover X-Y policy bundles, so all proposals are made in the form of ordered pairs (x,y).a. Is there an equilibrium proposal if the body uses majority rule?eb. Now suppose that player B has been appointed the sole agenda setter. If the status quois at C's ideal point, can B construct an agenda of pairwise votes that will leadeventually to her own ideal point being approved by the entire legislature body? ec. If so, construct such an agenda (you may assume sincere voting, and that the agendasetter can always persuade legislators indifferent between two policy bundles to votefor the bundle that she prefers) ed. What theorem does this illustrate?

These ìdetailsî just as the specific thought of harmony regularly have a significant effect on the…

Answered: 7. Assume five members of a voting body…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6. The production function for a process is x = 16(e1 + e2) if e₁ and e2 are both greater than zero, if either equal zero, then x = 0. The effort exerted by team member i is e; and x is measured in dollars. The sharing rule is that they split the yield of their joint effort in half. Team member i's utility is given by u; = m; - 2e, where m is income. The marginal disutility of effort for team member i is 4ei. (a) Find the efficient effort levels, production, and utility levels. (b) What is the outcome associated with their partnership (effort and income levels)? (c) What is the maximum amount that these two team members would be willing to pay someone to monitor their effort levels? Assume that the monitor has a big enough whip to completely stop any shirking.
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Suppose the market for auto insurance is made of up two types of buyers: high-risk and low-risk. Buyers’ willingness to pay (WTP) for auto insurance plans, and sellers’ willingness to accept (WTA) when selling plans to each type of buyer, are outlined in a photo (a) In a world with perfect information, would the market for insurance plans clear? If not, why? If yes, what are some prices that would a llow both markets to clear? The prices in each market are allowed to differ Assume now that there is asymmetric information and that insurance companies do not know how risky an individual buyer is. In the face of this uncertainty, they determine that the probability that a “walk-in” is high-risk is 0.75. What is the minimum price sellers are willing to accept when selling an insurance plan? At this price, will low- and high-risk buyers both be willing to purchase this insurance plan? Explain. Be sure the mention adverse selection in your answer.
8
Doubt: Calculations obtained from TC come from function TC = 80 + 3q + 2q2? For example, for q = 1, for me it is TC = 85, not 83 and so on. Please check it. Thanks
Now agent C can produce private information about the true realization x at t=1 at the cost γ=4. Suppose lA=lB=φA=φB=1 and x is either 40 or 100 with equal probability and w=70. - Suppose that φB=0.4 (and not φB=1). What is the maximum amount LB that agent B can borrow with probability 1? What is the haircut for agent A in equilibrium?
Which of the following statements is correct? a. As wealth increases, decreasing marginal utility makes potential losses less serious for high-wealth individuals—this leads to a decrease in willingness to pay to avoid a given fair bet as wealth increases. b. As wealth increases, decreasing marginal utility makes potential gains less attractive for high-wealth individuals—this leads to an increase in willingness to pay to avoid a given fair bet as wealth increases. c. As wealth increases, whether net willingness to pay decreases or increases, to avoid a given fair bet, depends on the precise shape of the utility function. d. All of the above.
Consider a financial market with two assets: peaches and lemons. The fraction of lemons in the economy is λ = 0.4. Buyers value peaches at up = $20 and lemons at v= $10. Sellers value peaches at vs = $16 and lemons at vi = $8. Sellers have all the bargaining power when setting prices at which assets trade. a) Assume both buyer and sellers can perfectly observe the quality of assets in the market. At what price will lemons and peaches trade? b) Now assume that the quality of assets is unobservable, but that buyers and sellers have symmetric information. That is, neither sellers or buyers can tell whether a particular asset is a lemon or a peach. What is the (pooling) price P* at which assets trade? c) Now assume that only sellers can observe the quality of assets, so that there is asym- metric information between buyers and sellers. Explain (intuitively, without equations) why the quality of assets traded in equilibrium will now depend on the price. d) Calculate the share of lemons that…
The blue curve on the following graph shows the tradeoff between security and tourism; that is, combinations of security and tourism above the blue curve are not possible, and those on or below the curve are possible. The vertical axis measures security, defined as the probability that a terrorist is intercepted before entering the country. The horizontal axis measures the number of yearly visitors to the United States, in millions. Suppose that before 9/11, there were 55 million visitors per year, and the probability of intercepting any particular terrorist at customs and immigration was 10%, as indicated by the purple point (diamond symbol). After the 9/11 attacks, a debate is held in Congress. Members of both parties agree that security measures need to be improved. However, there is some disagreement as to how much additional security is needed. Suppose the first bill that is introduced mandates that security be improved so that the probability of catching a terrorist at the border…
4. Consider the market for Citrus used car in which lemons account for 40% of the used cars offered for sale. Suppose that each owner of an orange Citrus values it at $12,000; he is willing to part with it for a price of at least $12,000, but not lower than this. Similarly, each owner of a lemon Citrus values it at $4,000. Suppose that potential buyers are willing to pay more for each type. If a buyer could be confi- dent that the car he was buying was an orange, he would be willing to pay $15,000 for it; if the car was a known lemon, he would be willing to pay $5,000. Suppose that there are many buyers, but a limited number of used cars. What type of used cars - lemons or oranges - will be offered for sale in the market, and at what prices?
Suppose that Alex wants to purchase a boat from Rosette. Alex is willing to pay up to $18,000, while Rosette is not willing to accept any offer below $15,000. Assume that there are a finite number of negotiating rounds. 1.If the discount factors for Rosette and Alex are δR = 0.05 and δA = 0.05, respectively, how much should Alex offer for the boat? 2.Suppose that Rosette’s discount factor is δR = 0.20, and Alex’s discount factor is δA =0.15. 3.How much should Alex offer for the boat? How does this offer differ from your r to part a, and why?
You and a friend are in Bits & Bytes restaurant, and the owner offers both of you an 8-slice pizza for free under the following condition. Each of you must simultaneously announce how many slices you would like; that is, each player i E 1,2 names his desired amount of pizza, 0s s, S 8. If s + sz S8 then the players get their demands (and the owner eats any leftover slices). If Si + s2> 8, then the players get nothing. Assume that you each care only about how much pizza you individually consume, and the more the better. Assume the demands can be only in integer numbers. Write out each player's best-response correspondence. B. What outcomes can be supported as pure-strategy Nash equilibria? A.

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