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- An artist is planning to sell signed prints of her latest work. If 50 prints are offered for sale, she can charge $600 each. However, if she makes more than 50 prints, she must lower the price of all the prints by $5 for each print in excess of the 50. That is, 51 prints reduce the price by $5, 52 prints reduce the price by $10, and so on. How many prints should the artist make to maximize her revenue? Let x be the number of prints and p the price per print. The demand equation is p and the revenue function is ROX)The Money Multiplier is 10 (based on a required reserve ratio of 10%) and theFederal Reserve buys $2 Trillion of bonds. This leads to $1.8 Trillion of ExcessReserves. How much available lending capacity is created for our system?Suppose the equilibrium price for good quality used cars is $20,000. And the equilibrium price for poor quality used cars is $10,000. Assume a potential used car buyer has imperfect information as to the condition of any given used car. Assume this potential buyer believes the probability a given used car is good quality is .60 and the probability a given used car is low quality is .40. Assume the seller has perfect information on all cars in inventory. How does the informational imbalance result in adverse selection? a. The expectedprice offered by the buyer encourages the seller to sell a poor quality car. Hence only poor quality cars are sold, which harms sellers. b. The expected price offered by the buyer encourages the seller to sell a good quality car. Hence only good quality cars are sold, which harms buyers. c. The expected price offered by the buyer encourages the seller to sell a good quality car. Hence only good quality cars are sold, which harms sellers. d. The…
- Rod's Auction House holds sealed-bid auctions for used computers every Tuesday. Each used computer is sold to the highest bidder at the second-highest bidder's bid. On average, half of the computers sold at Rod's Auction House are lemons, and half are good, used computers. A good, used computer is worth $750 to any buyer, and a lemon is worth only $200.Buyers are allowed to look over the used computers for a few minutes before they are auctioned. Almost all the buyers who attend the auction can do no better than random choice at picking good computers from among the lemons. The only exception is Al. Al can sometimes, but not always, detect a lemon by touching the tower and feeling its vibrations. The vibrations generated by a good computer's tower are always very regular and soft. On the other hand, the tower of 1/3 of the lemons emits very irregular and strong vibrations, while the tower of the remaining 2/3 of the lemons emits vibrations that are no different from those of a good…A car insurance company will give a discount to safer drivers. To get the discount, the car insurance company uses a mobile app to monitor speed, acceleration, and cellphone use while driving. Drivers with good behaviors will receive a discount on the premium. What problem is the insurance company trying to solve? Moral hazard Free rider problem Prisoners' dilemma Transaction costsExplain the relationship between moral hazard and insurance premiums
- Mike, Rosie, and Shobber live in separate houses along a dark and windy road. The following represent their marginal benefits for street lights: MBMike=200-2QM MBRosie=100-QR MBShobber=100-2QS where QM represents the quantity of street lights consumed by Mike, QR is the quantity of street lights consumed by Rosie and QS is the quantity of street lights consumed by Shobber. The Mayor of their town considers street lights to be a public good and is charged with purchasing the optimal number of street lights from Boone’s Light Shop. Boone’s is willing to sell street lights for $150 per light. b. What quantity of street lights should the Mayor purchase? Why? Suppose the Mayor is able to implement a pricing scheme to charge users for the illumination services. c. How much should each individual be charged? Does the tax revenue cover the total cost of providing the optimal number of streetlights?Describe two empirical studies that suggest demonstrate the market effects of asymmetric informationCan loyal consumers (VLC) be offered quality products and services at premium rates when the consumer segment's demand is high? Can they be allowed less service if their VLC is low? Justify.
- Consider the used car market with imperfect information. There are 10 bad quality cars (lemons) and 12 good quality cars. The value of a bad car is $8,000 and the value of a good car is $20,000. What is the equilibrium price? Group of answer choices $13,300 $21,818.18 $13,454.54 $14,000Fred wants to hire Barney to manage his retail store. Barney can apply a high level of effort (at a cost to him of $30), a medium level of effort (at a cost to him of $10), or a low level of effort (at a cost to him of $0). Fred's profits depend not only of the level of Barney's effort but also on the state of consumer demand. Fred believes that demand will be high with probability 50 percent (and therefore demand will be low with probability 50 percent). Fred has determined the following possible profit levels (before paying Barney) will occur depending on Barney's effort and the state of consumer demand: Demand low high effort low 20 40 medium 40 80 high 80 100 Of the choices below, what is the largest percentage range of profit provided to Barney that would ensure Barney would supply high effort? a. any percent greater than 75.00 percent (3/4). b. any percent greater than 66.66 percent (2/3). c. any percent greater than 50.00 percent (1/2).d. any…In circumstances of imperfect information should one expect the market to be efficient? Explain briefly.
