Reference no: EM13741340

Questions 1, 2 & 3 involve the following situation:
1.The demand for coal lumps is given by the following: p=140-0.5*Q. The private marginal cost of coal lumps is given by the following: MC=20+0.5Q. In addition, there is an external cost of coal lumps (E) to residents who live near the coal mine where E=0.5Q. 
The socially optimal level of coal production is:

40.

80.

120.

180.

none of the above.

2.If the market for coal lumps is competitive, the deadweight loss to society is equal to:

0.

600.

1200.

2400.

None of the above.

3.A Pigouvian tax of _______ on coal production will ensure the efficient outcome is achieved:

$40.

$60.

$90.

$135.

None of the above.

4.Consider the following game. Jerry and Kerry are roommates who must make decisions about cleaning. Jerry's payoff is the first number in each cell and a higher number is a better outcome:
Kerry
Clean Don't clean 
Jerry (6,2) (2,3)
(8,4) (4,2)
Both Jerry and Kerry have a strictly dominant strategy.


This game has no Nash equilibrium.

This game has a single Nash equilibrium.

This game has more than one Nash equilibrium.

Both Jerry and Kerry have a strictly dominant strategy.

both b and d are correct.

5.A monopolist faces a demand curve given by Q=120-2p and has constant marginal (and average cost) of 20. What is the economic profit made by this profit-maximising monopolist if they engage in perfect price discrimination?

0

800

1600

3200

None of the above

6.A single price monopolist which is producing at the profit maximising point decides to increase its prices by 1%. We expect quantities sold to:

decrease by more than 1%.

decrease by less than 1%.

increase by more than 1%.

increase by less than 1%.

There is not enough information to answer the question.

7.Bob has a demand curve for public broadcasting (G) given by G = 12 - 0.5p. Similarly, Christine has a demand curve given by the following: G = 12 - 2p. Assume that the marginal cost of providing every hour of broadcasting is equal to 8. In a competitive equilibrium the number of hours supplied equals:

2.

3.

5.

6.

8.

8.Bob has a demand curve for public broadcasting (G) given by G = 12 - 0.5p. Similarly, Christine has a demand curve given by the following: G = 12 - 2p. Assume that the marginal cost of providing every hour of broadcasting is equal to 8. The efficient number of hours supplied equals:

4.

8.8.

10.

11.2.

12.

9.Two shops in Newtown, "Bob's Kebabs" and "Jose's Pies", are deciding whether to hire a security guard. The security guard represents a public good in that the guard will provide deterrence to both stores. The cost of hiring a guard is $20 in total or $10 per store if the cost is shared. Each store will benefit from the presence of a security guard by reducing theft by $16. The payoff matrix is given by:

Bob's kebab
Hire Dont hire
jose's pies hire (4,4) (-4,16)
dont hire (16,-4) (0,0)



In the Nash equilibrium:

A guard will be hired.

No guard is hired.

One store hires the guard and both benefit from the presence of the guard.

Neither player has a dominant strategy and there is no Nash equilibrium.

More information is required to answer the question.

10.Assume that individuals are homogeneous and that each has a demand curve of the following form for internet service: p=100-2q where p is the price per hour and q is hours per month. Assume the firm has a constant marginal cost of $8. The profit maximising two-part tariff results in the firm selling ______ hours and receiving total revenue of ________ from each consumer:

8: 64.

23: 2116:

23: 2116.

46: 2484.

92: 2484.