A city park has become a popular hotspot for food truck vendors, offering a variety of cuisines to passersby. The food trucks offer free meals to homeless groups, but university students often exploit this charity by waiting there. Both groups gain a payoff of 10 units for receiving a free meal. For homeless individuals, the cost of waiting in line is calculated as t²/320. Similarly, for college students, the cost of waiting is also t²/160. Here's the challenge: the food truck vendors cannot differentiate between homeless individuals and college students just by looking at them. This means they cannot know whether someone in line genuinely needs the free meal due to their homeless status or is a college student trying to score a complimentary meal. 1. What is the minimum wait time t to separate types? 2. After a while, the food truck vendors find they can successfully identify and turn away student students half the time. Students who are turned away receive no free meal and incur a cost of 5 for their time and embarrassment. Will the partial identification of university students reduce or increase the answer in part (a)? Explain.

A city park has become a popular hotspot for food truck vendors, offering a variety of cuisines to passersby. The food trucks offer free meals to homeless groups, but university students often exploit this charity by waiting there. Both groups gain a payoff of 10 units for receiving a free meal. For homeless individuals, the cost of waiting in line is calculated as t²/320. Similarly, for college students, the cost of waiting is also t²/160. Here's the challenge: the food truck vendors cannot differentiate between homeless individuals and college students just by looking at them. This means they cannot know whether someone in line genuinely needs the free meal due to their homeless status or is a college student trying to score a complimentary meal. 1. What is the minimum wait time t to separate types? 2. After a while, the food truck vendors find they can successfully identify and turn away student students half the time. Students who are turned away receive no free meal and incur a cost of 5 for their time and embarrassment. Will the partial identification of university students reduce or increase the answer in part (a)? Explain.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter9: Applications Of Cost Theory

Section: Chapter Questions

Problem 2.1CE

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