What is the size of the government budget surplus

Assignment Help Microeconomics

Reference no: EM13724477

1. There are three individuals and each has an endowment of 40 units of the private good. Let U₁ = α₁√x + y₁, U₂ = α₂√x + y₂, U₃ = α₃ ln (x + 1) + y₃. The production of 1 unit of X requires δ units of Y as input. Express the Samuelson condition as simply as you can, then further simplify the condition for the case δ = α₃.

2. Utility function of agent i is U_i = α_ix + y_i for i = 1, 2, · · · , n. The production of x units of the public good requires 1/2 x² units of the private good as input. An allocation is determined by having each i report a benefit parameter β_i, producing β₁ + β₂ + · · · + β_n units of the public good and collecting a total of 1/2(β₁ + β₂ + · · · + β_n)² units of the private goods from households.(Note that we use αi to denote individual i's true benefit parameter, with β_i representing the reported benefit parameter.) Suppose each individual i's consumption of the private good is reduced by 1/2β_i(β₁ +β₂ +· · ·+ β_n) units. Suppose that α₂ + α₃ +· · ·+ α_n = 2. What value of β1, person 1's reported benefit parameter, maximizes U₁, given 0 < α₁ < 1 and the fact that the benefit parameters reported by the others sum to 2?

3. Consider the case of three individuals, Soren, Rosie and Edie, and two public projects F and G. Table below gives the benefit derived by each person from each project.

	Soren	Rosie	Edie
Project F	10	20	30
Project G	15	10	40

(a) What project would be undertaken if the pivotal mechanism were employed and individuals reported their benefits truthfully? Calculate surtax for each individual.

(b) Show the none of the three individuals has an incentive to misrepresent his or her benefit in this setting. What does it mean to say that truthful revelation of preference is a dominant strategy in this case?

Reference no: EM13724477

Questions Cloud

Discussion on creating a toxic organizational culture : "Who's to Blame for Creating a Toxic Organizational Culture" Guthrie presents the position that as the leader, New Jersey Governor Chris Christie was responsible for harboring an environment that led to what was termed Bridgegate. Based upon what ..

Basis for performance criteria : Question 1: Briefly describe the three general types of goals used as the basis for performance criteria?

List what the community and business need : List what the community and business need/want from each other. Discuss if you agree or not with this arrangement

International compensation and the balance sheet : Question 1: Describe the advantages and disadvantages of the going rate approach to international compensation and the balance sheet approach.

What is the size of the government budget surplus : What is the size of the government budget surplus associated with your answer - What does it mean to say that truthful revelation of preference is a dominant strategy in this case?

Provide a good foundation for the rest of the project : Provide a background of yourself, including where you live, what you do for a living, and your previous leadership experience - either formal or informal. This will provide a good foundation for the rest of the project.

Explain department of labor and equal employment opportunity : Word count should be no less than 125 words each to include in-text citatiions and references from reputable sources such as US Department of Labor and Equal Employment Opportunity Commission

What is the nature of a company : What is the nature of a company with a differentiation strategy? Give an example of a company with this strategy

Differentiate between coaching and mentoring : Differentiate between coaching and mentoring. Provide an example to support how either of the two was used successfully in your current or past work life. Respond to at least two of your peers for this posting.

User Account

All Pages