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Consider two identical parcels of land, each of whose surface value is $1,000 to a potential buyer. The owner of each parcel values the surface at $800, but one of the parcels has contamination that will cost $500 to clean up. The owners know whether their parcels are contaminated, but the buyer does not (that is, the parcels look identical to the buyer).
(a) Is it efficient for the buyer to acquire one of the parcels? Explain.
(b) What is the buyer's best offer for a parcel if sellers are fully responsible for cleanup costs? What is the buyer's best offer if the buyer is responsible?
(c) Show that the seller of the uncontaminated parcel will accept the buyer's best offer only if sellers are responsible, but the seller of the contaminated parcel will accept the buyer's best offer under either rule for cleanup costs.
A. Find the price and quantity that maximizes the company's profit B. Find the price and quantity that would maximize social welfare C. Find out Dead weight loss
Calculate the rate of price change between 2000 and 2001 and label this rate as either deflation, disinflation, or hyperinflation. Calculate the rate of price change between 2001 and 2002 and label this rate as either deflation, disinflation, or h..
A consumer enjoys two goods, X and Y. The price of X is $5 and the price of Y is $10 and the consumer has $1500 to spend on these goods. The utility function of the consumer is U = Y √x ; thus MUx = 1/2 Y/ √x and MUy = √x . What bundle of goods wi..
assume that $500 is deposited today, two years from now, four years from now, six years from now, and eight years from now. At a 10% interest rate compounded annually, determine the future value at the end of year 9.
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Starting salaries of economics majors have a mean of $47,000/year with a standard deviation of $8,000. What is the probability that a random sample of 100 majors will have an average salary of more than $50,000 year
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What is each orchard's labor demand as a function of the daily wage W? What is the market's labor demand?b. Ectenia has 200 workers who supply their labor inelastically. Solve for the wage W. How many workers does each orchard hire? How much profit..
Three students have each saved $1000. Each has an investment opportunity in which he or she can invest up to $2000. The rates of return on the students' investment projects are: Harry: 5% Ron: 8% Hermione: 20%.) If borrowing and lending is prohibit..
A philanthropist working to set up a permanent endowment wants to deposit money each year, starting now and making 10 more (i.e., 11) deposits, so that money will be available for research related to planetary colonization.
How much must you deposit in your retirement account each year for 10 years starting now (i.e., years 0 through 9) if you want to be able to withdraw $50,000 per year forever beginning 30 years from now? Assume the account earns interest at 10% pe..
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