Reference no: EM132930852

Questions.

1. Select the correct statement about the Market Based Instruments (MBIs) approach to managing environment: (a) It restricts the behaviour of the polluters. (b) It incentivises the behaviour of the polluters by commands. (c) It punishes the behaviour of the polluters by sending signals. (d) None of the above.
2. Let the buyer and seller for the bilateral monopoly discussed in Sec 8.5 have the production functions q1 = 270q2 - 2 and x = 0.25 respectively. Assume that the price of q1 is 3 and the price of x is 6. (a) Determine the values of q2, p2 and the profits of the buyer and seller for the monopoly, monopsony, and quasi-competitive solutions. (b) Determine the bargaining limits for p2 under the assumption that the buyer can do no worse than the monopoly solution and the seller can do no worse than the monopsony solution.
3. . Consider a two-person two-commodity, pure-exchange economy with paper money. The utility functions are U1 = . and U2 = . . Consumer I has initial endowments of 30 units of Q1, 5 units of Q2, and 43 units of money; II has respective endowments of 20, 10, and 2. Each of the consumers desires to hold a money stock equal to one-fifth of the value of her initial commodity endowment. Determine equilibrium money prices for Q1 and Q2. Show that the equilibrium prices would triple if the initial money stocks of I and II were increased to129 and 6 respectively.
4. Find equilibrium prices for the three-commodity system given by E2 = 2 + - - + + = E3 = p2 - 2p3 + 2 = 0
5. An economy satisfies all the conditions for Pareto optimality except for one producer who is a monopolist in the market for her output and a monopolist in the market for the single input that she uses to produce her output. Her production function is q = 0.5x, the demand function for her output is p = 100 - 4q, and the supply function for her input is r = 2 + 2x. Find the values of q, x, p, and r that maximize the producer's profit. Find the values for these variables that would prevail if she satisfied the appropriate Pareto conditions.
6. 6. Consider an economy with two consumers, two public goods, one ordinary good, one implicit production function, and a fixed supply of one primary factor that does not enter the consumer's utility functions. Determine the first-order conditions for a Pareto-optimal allocation. In particular, what combination of RCSs must equal the RPT for the two public goods?
7. Assume that the cost functions of two firms producing the same commodity are C1 = 2 + - C2 = 3 + Determine the output levels of the firms on the assumption that each equates its private MC to a fixed market price of 240. Determine their output levels on the assumption that each equates its social MC to the market price.
8. Determine taxes and subsidies that will lead the firms described in Exercise 36 to their Paretooptimal output levels but leave their profits unchanged. What is the size of the social dividend secured by this change in allocation?
9. Assume that there are two consumers and two commodities. Let the utility functions be U1 = q11q12 and U2 = q21q22 with q11 + q21 =q1 and q12 + q22 = q2. Show that Scitovsky contours are given by q1q2 = (√ + √ ) 2
10. A consumer's consumption-utility function for a two-period horizon is U = . ; his income stream is y1 = 1000, y2 = 648; and the market rate of interest is 0.08. Determine values for c1 and c2 that maximize his utility. Is he a borrower or lender?