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Explain how the concept of Nash Equilibrium can be applied to the tragedy of commons.
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- The result that, under certain conditions, government intervention is unnecessary to fix a negative externality because it can be eliminated through bargaining between the affected people is called Multiple Choice collective bargaining. a Nash equilibrium. social justice. the Coase Theorem.Consider the following decision by two countries: a small country (C1) and a large country (C2). When both countries cooprate and agree to an environmental agreement, C1 receives 4 and C2 receives 5 units of benefit. When they do not cooperae, they incur costs of -1, and -2, respectively. The payoffs associated with other outcomes are described in the table below. Large country (C2) Agree to environmental protection (cooperate) Do not agree to environmental protection (do not cooperate) The Socially Optiomal outcome is The Nash Equilibrium is Agree to environmental protection (cooperate) C1:4 C2: 5 C1: 2 C2: 6 [Choose ] Small country (C1) [Choose ] Do not agree to environmental protection (do not cooperate) C1:2 C2: -3 C1: -1 C2: -2Please label the graph point where the socially optimal equilibrium is
- 1. During the winter break, Sam decides to go for a skiing vacation in Aspen instead of taking piano lessons. The opportunity cost of the skiing vacation is the:cost of accommodation and food in Aspen.value of piano lessons.cost of buying a piano.amount paid to the skiing instructor. 2. Which of the following is an example of a negative externality?Smith reducing the consumption of imported wine following an increase in the price of imported winePhoebe refusing to contribute to the building of a children’s park in her neighborhoodChristina accepting a payment in cash rather than in check for her laundry servicesTom playing music loudly in his room, disturbing his roommate who has an exam the next day3. A perfectly competitive firm sells 10 units of Good X at a price of $2 per unit. It incurs a fixed cost of $5 and a variable cost of $40 to produce the good. Which of the following is true?The firm should operate in the short run but shut down in the long run.The marginal cost…Suppose there are only two fishermen, Maria and Ruby, who fish along a certain coast. They would each benefit if lighthouses were built along the coast where they fish. The marginal cost of building each additional lighthouse is $100. Maria’s demand curve for lighthouses is given by P=170-2Q, and Ruby’s by P=150-Q, where Q is the number of lighthouses. Explain why we might not expect to find the efficient number of lighthouses along this coast. Draw the demand curve for Maria and Ruby individually and the market demand for lighthouses. What is the efficient number of lighthouses?Describe the Nash equilibrium/a and the mutually-preferred outcome. Finally, consider how people are sometimes able to resolve this social dilemma in the real world. Clearly explain how this method is successful in moving the players to a socially optimal outcome.
- Which of the following statements is correct? Select one: a.In models of network goods with positive externalities, no consumption is always an equilibrium. b. The equilibrium in the hotelling model when both firms have the same location is for the firms to set their prices equal to their (constant) marginal cost even if their marginal costs are different. c. If all firms start wiht the same techonology, under both minor and drastic innovations the inovator firm is only one firm producing after the innovation. d. The Schumpeter hypothesis establishes that competitive firms have higher capacity to produce R&D than monopolies.Consider a club promoter who wants to build a night club right next to your apartment building. You and your neighbors will be able to hear the music in your apartments late into the night. In this case, the club‟s owners and attendees may both be quite satisfied with their voluntary exchange, but you have no voice in their market transaction. The effect of market exchange on a third party who is outside or “external” to the exchange is called an externality. What kind of externality do you think this club example may provide?Which of the following statements is consistent with Charles Tiebout’s concept of competition by individuals voting with their feet? Group of answer choices Individuals elect the politicians that promise to provide them with the desired level of public goods. Individuals move to the community that provides them with the desired level of public goods. Individuals are herd-like and prefer the same level of public goods as their neighbors. Individuals do not understand what public goods are offered in a town until they move there and try it out.
- Efficiency in the presence of externalities Air horns impose many external costs on society: the risk of being deafened, the annoyance of being awakened in the middle of the night, and so on. Therefore, the market equilibrium quantity of air horns is not equal to the socially optimal quantity. The following graph shows the demand for air horns (their private value), the supply of air horns (the private cost of producing them), and the social cost of air horns, including both the private cost and external costs. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.If a competitive market is characterized by a negative externality, then which of the following statements is true Question 5Answer a. Social surplus is less than market surplus b. Social surplus is equal to market surplus c. Social surplus may be greater than or less than market surplus, depending on the size of the externality d. Social surplus is greater than market surplusSuppose a firm is able to dump toxic chemicals into a river next to its factory, which poisons wildlife and harms the health of nearby residents who have no business with the company. This scenario is characterized by which is an example of an externality, market failure market power; market failure market power; welfare an externality; welfare
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