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- Suppose you observe a person's answer to two decision problems. Problem 1: You are offered $40 today. What is the minimum amount x you demand one month from today in order to be willing to give up the $40 now? Answer: x = 52. Problem 2: Your are offered $40 today. What is the minimum amount x you demand one year from today in order to be willing to give up the $40 now? Answer: $60. 1. Demonstrate that the rational model of time preferences is violated for this choice pattern. 2. Derive this individual's B and d for the hyperbolic time discounting model. 3. Suppose the utility you get from eating ice cream now is 10 utils. But you pay a cost of -4 utils per hour for the next 4 hours, because it gives you indigestion and makes you feel lethargic. If your hourly B and d for this problem are B = .6 and d = .9, ... 1. What is the total discounted utility of eating ice cream now? 2. What is your total discounted utility now of planning to eat ice cream after lunch tomorrow? 3. Do you eat ice…Shortly after Second World War, Heusen created a comfortable, self-folding collar. Prior to the invention, men wore collarless shirts with disposable collars either made of paper or a plastic-like material. In 1919, a U.S. patent was granted for the collar. In 1921, Heusen introduced the revolutionary new collar to the public with immediate and overwhelming success. This invention would be part of the environment for Heusen, the shirt manufacturer. a. interrelated O b. specific c. centralized d. covert e. overtPrior to 2003, the city of Boston was often one big parking lot. Traffic jams were common, and it could take hours to travel a couple of miles. Each additional commuter contributed to the congestion, which can be measured by the total number of cars on Boston roads. Although each commuter suffered by spending valuable time in traffic, none of them paid for the inconvenience they caused others. The total cost of travel includes opportunity cost of time spent in traffic and any fees levied by the Boston authorities. Draw a graph illustrating the overuse of Boston roads, assuming there is no fee to enter London in a vehicle and that roads are a common resource. Put the cost of travel on the vertical axis and the quantity of cars on the horizontal axis. Draw a typical demand, private cost and social cost curve and label the market equilibrium. In February 2003, the city of Boston began charging a $5 congestion fee on all vehicles travelling in central Boston. Illustrate the effects of…
- Describe two activities by the government that can cause allocative inefficiency.The COVID-19 pandemic severely affected the Australian restaurant industry. Also, Government policy restricting the seating capacity of restaurants resulted in a drastic decline in the number of people dining in restaurants. As the number of COVID-19 cases is steadily decreasing, the government has removed the restriction and, in addition, offered adults in every household a $40 dining voucher to pay part of their restaurant bills. What would be the short-term impact of the government’s $40 dining voucher policy on the equilibrium price and quantity of restaurant meals? Assume that the restaurant industry is competitive and currently in long-run equilibrium. Illustrate your answer with either DIAGRAM A or DIAGRAM B.To ensure safety and efficacy, the Food and Drug Administration regulates the medicines that pharmacies are allowed to sell in the US. Sometimes this means that a company must test a drug for years before receiving FDA approval and reaching the market. We can easily identify the "winners" in this system as those who are protected from unsafe drugs that might otherwise harm them. Who are the more "anonymous losers" who suffer due to the strict FDA medical regulations? Explain why according to the theory of rational ignorance, an individual will decide not to participate in the election process (vote).
- Write the two views of the basis for determining the social discount rate?In January 2012, the Obama administration rejected the first proposal to build this pipeline, claiming that more time was needed to fully assess the various impacts this pipeline might have on the United States before a final decision could be made. A few months later, the TransCanada Corporation submitted a new proposal, detailing a revised plan for building the Keystone XL pipeline. In November 2015, the Obama administration formally rejected TransCanada's application for the Keystone XL pipeline. In announcing his decision, President Obama said that "shipping dirtier crude oil into our country would not increase America's energy security" and that approving this project would have undercut America's role as a global leader on combatting climate change. In January 2017, the Trump administration signed an executive order approving the project, but TransCanada may never complete the project because it may no longer be commercially viable due to lower energy costs and less demand for…How does managerial economics breach economics in theory and practice?
- How can an anticipated change affect a market players decision?Suppose the government of Marina decides to pay for public radio by taxing people on the basis of the number of hours they listen to it. In order to determine the tax, it decides to conduct a survey. However, if the survey is based on voluntary self-reporting. which of the following is likely to happen? In order to evade taxes, individuals may shift from the formal, reported economy to an underground, "off the books" economy. Many individuals may understate the number of hours they listen to public radio to government in order to reduce their tax bill. c. People who report many hours of listening may pay a small proportion of their income in public radio tax. Many individuals may overstate the number of hours they listen to public radio to government in order to receive a lower tax bill. e. Individuals with higher incomes may pay lower taxes than individuals with lower income.Friedrich von Hayek won the Nobel Prize in Economics in 1974. In awarding the prize, the Academy specifically referred to his conclusion quoting the Academy, not Hayek "that only by far-reaching decentralization in a market system with competition and free price-fixing is it possible to make full use of knowledge and information." What did the Academy mean?