Consider an economy with three people and two goods: private good (x) and public good (y). Suppose that marginal rate of transformation is 1. (one unit-production of one unit of public good). The utility functions of the individuals are given below:us (y.x₁) = 2log(y) + x₁Uz (x2)=3¹/2 + X₂u₂ (y.xy) = y + xWhat is the level of public good under the majority voting outcome when individuals are sharing the cost of the public good equally?O a. 81/4O b. 6Oc none of the aboveOd. 1/3Oe 1

Public Goods :- Public goods which are non-rivalious and non-exhaustive in nature and total amount…

Consider an economy with three people and two goods: private good (x) and public good (y). Suppose that marginal rate of transformation is 1. (one L production of one unit of public good). The utility functions of the individuals are given below. U₁ (y.x₁) 2log(y) + x₁ U₂ (V.X₂) = 3y¹/2 + x2 Us (V.x₂) ¹ + x What is the level of public good under the majority voting outcome when individuals are sharing the cost of the public good equally? O a. 81/4 O b. 6 Oc none of the above O d. 1/3 no

Consider an economy with three people and two goods: private good (x) and public good (y). Suppose that marginal rate of transformation is 1. (one L production of one unit of public good). The utility functions of the individuals are given below. U₁ (y.x₁) 2log(y) + x₁ U₂ (V.X₂) = 3y¹/2 + x2 Us (V.x₂) ¹ + x What is the level of public good under the majority voting outcome when individuals are sharing the cost of the public good equally? O a. 81/4 O b. 6 Oc none of the above O d. 1/3 no

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that households have one child each and an income of M per year to spend on their child's education and other goods. Each year they elect to either send their children to a Public School and receive $21,000 worth of education or to a Private School and pay $X to receive $14,000+$X worth of education. For example, if a household chooses to spend X=$5,000 on private education, then they receive $19,000 in education. Students Government Subsidy Fee Total Funding Public School 2.50 million $21,000 $0 $21,000 Private School 1.50 million $14,000 $X* $x*+$14,000 Assume that $ of education funding whether provided by Government Schools or Private Schools are perfect substitutes. Note that for the Private school option, the $14,000 is effectively added to income as a voucher (V), which households can top up with their own spending X on education. Note that households cannot spend more on other goods than their income (that is they may not exchange the Government funding for cash). All…
2. Compute the utility of group 2 from driving when group 1 drives: U2(x2 = d, x1 = d). Compute the utility of group 2 from taking public transport when group 1 drives: U2(x2 = p, x1 = d). Does group 2 prefer to drive or take public transport, given that group 1 drives?
3. Consider an economy with two individuals, Eve and Adam. There are two goods-apples(A) and figs (F). Eve has fixed-coefficient preferences {} where the superscript denotes e for Eve. Eve has an endowment of 20 apples and nothing else. Adam owns only labour, and consumes only apples, thus ua (A, F) = A. u(A, F) = min Note that Adam gets no utility from leisure, so he supplies labour inelastically. Labour (L) is needed to produce figs, using the technology F = L. Suppose initially the endowment of Adam is K units of labour. (a) Compute algebraically the competitive equilibria of this economy for both K K. Is it possible that he becomes worse off?
Your own a chocolate producing company which can advertise on both television (T) and internet(I). The effect of TV and online commercials on sales is again given byS(T,I) = 500 + 48T−6T2+ 112I−6I2+ 4TI. You have a budget of $25 that you can spend on T and I. The price of aTV commercial is $12per unit and the price of an online commercial is also $12 per unit. 1. Determine the optimal level of TV commercials T and online commercials I if you have to spend all of your budget. You should provide two methods to solve this, by direct substitution and by setting up the Lagrangian. Is the Lagrange multiplier positive or negative? Give an intuitive interpretation of why this is the case? 2. Now determine the optimal level of TV commercials T and online commercials I if you DO NOT have to spend all of your budget. Do you obtain the same answer as subquestion 5.1? What is the Lagrange multiplier equal to in this case? Discuss.
2. Residents in a town are voting to decide where a new library will be built. The residents homes are on the same street and the "map" of the town is represented below. The letters represent the location of each house. The numbers represent distance in 100 meters (in other words, house 'a' is 100 meters from house 'b' and 1200 meters from house 'i'). Each house- hold would receive a utility of 12 if the library was built in front of that house; utility decreases by I unit as the distance to the library increases by 100 meters. Use the distance markers (the numbers) to indicate where the library should go according to the following aggregation methods: a b cde fg hi 012 34 5 67 8 9 10 11 12 (a) A simple majority vote? (b) A Rawlsian planner? (c) A standard utilitarian function?
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Assume that the price per hamburger is $2.50. The incremental value to you of each hamburger is described in the table below. If you are seeking to maximize total net gains from hamburgers, how many hamburgers should you purchase? Pairs of jeans Marginal Benefit 1 $8.00 2 $6.00 3 $4.00 4 $2.00 5 $0.00 Group of answer choices 3 2 4 5 1
For many years, states levy a special sales tax on wine often called a "sin tax". The reasoning behind these special sales taxes is that wine consumption can lead to particular social costs such as drunk driving, violence, etc. However, many medical studies have demonstrated that moderate consumption of red wine can lower the risks for many diseases such as coronary heart disease. Thus, there are social benefits as well. Suppose that states, in recognition of some of the benefits to wine consumption, decide to decrease the sales tax on Oregon Pinot Noir. What effect will this have on consumer surplus, producer surplus, and deadweight loss. Consumer surplus increases, producer surplus increases, and deadweight loss increases. Consumer surplus decreases, producer surplus decreases, and deadweight loss decreases. Consumer surplus decreases, producer surplus increases, and deadweight loss is unchanged. Consumer surplus increases, producer surplus increases, and deadweight loss decreases.