ECONOMICS W/CONNECT+20 >C<
20th Edition
ISBN: 9781259714993
Author: McConnell
Publisher: MCG CUSTOM
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Question
Chapter 5.A, Problem 1ARQ
To determine
Paradox of voting.
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1.
Chapter 4
Market Failure Caused by Externalities
Page
94 Problem 1
Draw a supply and demand graph and
identify the areas of consumer surplus and
producer surplus. Given the demand curve,
how will an increase in supply affect the
amount of surplus shown in your diagram ?
Explain. LO4.1 (Differentiate between
demand-side market failures and supply-side
market failures.
2. Individual Problems 15-2
Mr. and Mrs. Ward typically vote oppositely in elections and so their votes "cancel each other out." They each gain 20 units of utility from a vote for
their positions (and lose 20 units of utility from a vote against their positions). However, the bother of actually voting costs each 10 units of utility. The
following matrix summarizes the strategies for both Mr. Ward and Mrs. Ward.
Mr. Ward
Vote
Vote Mr. Ward: -10, Mrs. Ward: -10
Don't Vote Mr. Ward: -20, Mrs. Ward: 10
The Nash equilibrium for this game is for Mr. Ward to
payoff of
O True
Mrs. Ward
O False
Don't Vote
Mr. Ward: 10, Mrs. Ward: -20
Mr. Ward: 0, Mrs. Ward: 0
units of utility and Mrs. Ward receives a payoff of
Suppose Mr. and Mrs. Ward agreed not to vote in tomorrow's election.
This agreement not to vote
True or False: This agreement would increase utility for each spouse, compared to the Nash equilibrium from the previous part of the question.
and for Mrs. Ward to
units of utility.
a Nash…
Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents
are trying to determine how large, in acres, they should build the public park. The following table shows each
resident's willingness to pay for each acre of the park.
Acres
1
2
3
4
5
6
7
Sophia
0 acres
O1 acre
2 acres
10
8
6
3
1
O3 acres
0
Willingness to Pay (Dollars)
Amber
Refer to Table 11-1. Suppose the cost to build the park is $24 per acre and that the residents have agreed to
split the cost of building the park equally. If the residents vote to determine the size of park to build, basing
their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the
largest park size for which the majority of residents would vote "yes?"
24
18
14
8
6
4
2
Cedric
6
5
4
3
2
1
0
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