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Consider a binary choice to allow or not the emission of pollutants. The cost to consumers of allowing the pollution is C = 2,000, but this cost is only observable to the consumers. The benefit for the polluter of allowing the externality is B = 2,300, and only the polluter knows this benefit. Clearly, optimality requires this externality is allowed, since B > C. However, the final decision must be based on what each party chooses to reveal.
a. Construct a tax-subsidy revelation scheme such that it is a dominant strategy for each party to report truthfully their private information.
b. Show that this revelation scheme induces the optimal production of the externality.
c. Show that this revelation scheme is unbalanced in the sense that the given equilibrium reports the tax to be paid by the polluter is less than the subsidy paid to the pollutee.
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An ice cream vendor sells three flavors: chocolate, strawberry, and vanilla. 45% of the sales are chocolate, while 30% are strawberry, with the rest vanilla flavored.
Given the table below, graph the demand and supply curves for flashlights. Make certain to label the equilibrium price and equilibrium quantity. What is the equilibrium price and the equilibrium quantity
Determine the Herfindahl index for an industry composed of three companies one with 70% of the market, and the other two with 20 and 10 percent of the market respectively one company with 50% share
At what salary would it make sense for this firm to hire an incompetent manager?
When you were born, your grandfather established a trust fund for you in the cayman islands. The account has been earning interest at the rate of 10% per year. If this account will be worth $100,0000 on your 25th birthday, how much did your grandf..
The attendant quotes you $100. Suppose you rate the opportunity cost of getting back in your car and sampling another price at $5. Assuming you're risk-neutral, what should you do A. Sample another price. B. Stay at this motel.
Each month, an airline sells 1,500 business-class tickets from London to Paris at $200 a ticket, and 6,000 economy-class tickets at $80 a ticket. Use this information to estimate the price elasticities of demand of business travelers and tourists ..
How would you expect the choice to be made? Who would most strongly favor moving to E1 ? versus E2 ? What policy would correspond to "balanced growth"?
What do the stories, "Young Goodman Brown," "Dead Man's Path," and "A Very Old Man with Enormous Wings" imply about people who claim to be religious? Is this a positive view of worship or a negative view?
Suppose the demand curve for a monopolist is QD = 500 - P and the marginal revenue function is MR = 500 - 2Q. The monopolist has a constant marginal and average total cost of $50 per unit. a. Find the monopolist's profit-maximizing output and price..
university bank a monopoly bans has the following items on its balance sheet, an actual reserve = 1 billion dollars, Demand deposits = 7 billion dollars, reserve requirement is =10. What is the bank's required reserve
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