3. A society consists of 3 identical individuals who derive utility from a public good. The public good can be provided at a constant marginal cost of 2. Let x, denote the level of public good provision by i, where i 1,2,3. Let X- x1 + x2 + x3 be the total provision. The net benefit enjoyed by individual i from providing x, units of the public good is given by U(x,, X) -4 ln X-2x, where i=1,2. Is the total provision X under individual optimisation higher or lower than the socially optimal level of provision Xº? Explain the intuition for your result.
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- 4. The mechanism designer must allocate 10 identical objects. There is no cost asso- ciated with allocating the objects. There are more than 10 individuals interested B C D vB(a) VB -2 -1 vc(a) -5 -5 vp(a) -1 -2 UD Table 1 - Negative consumption externality in receiving an object. Each individual i would like to receive at most one object. The utility of individual i is given by Ui = Viqi – ti, where vi is i's private value for receiving an object, and qi = 1 if i receives an object and q; = 0 otherwise. (a) Find all Pareto efficient outcomes. (b) Find the VCG mechanism for this problem. (c) Does the VCG mechanism run a deficit?14. Determine whether the government's actions described below correct positive, or negative externalities or neither: A. Correct negative externalities B. Correct neither C. Correct positive externalities ✓ 1. the government takes on production of the product 2. The government takes measures to increase the cost of production in the market 23. the government invests in infrastructure11 Consider a public good, G, that is shared by Consumer A and B. Each can purchase G at the price of $20 per unit. A's marginal benefit from this public good is given by MBA=50-G. If A thinks B is getting 10 units of G, then A's optimal contribution into G will be ? units. On the other hand, if A thinks B is getting 25 units of G, then A's will be optimal contribution into G will be ?units
- A strategy for consumer 1 in the private provision of public goods model is: A quantity of public good purchases for each level of public good purchases of consumer 2. A quantity of public good purchases. A quantity of public good purchases that maximises 1's utility for each level of public good purchases of consumer 2. The total quantity of public goods consumed by consumer 1. O O O O1. True or False g. Pollution arising from private automobile usage may be alleviated by a carbon tax on gasoline. h. Private provision of water and sewer service would result in a level of provision of service below the socially optimal level. i. Average cost pricing would result in an optimal level of provision of local services such as water and sewer.Consider a public good, G, that is shared by Consumer A and B. Each can purchase G at the price of $20 per unit. A's marginal benefit from this public good is given by MBA-50-G. If A thinks B is getting 10 units of G, then A's optimal contribution into G will be units. On the other hand, if A thinks B is getting 20 units of G, then A's optimal contribution into G will be units. Blank # 1 Blank # 2 A/ N
- 1. Solve for the graph and aggregate demand of the city’s 30 residents as functions of the number of trees. Label intercepts slopes and intersection of two sections. 2. Assume that the city can obtain each tree at a constant marginal cost of 200. Solve the socially efficient numbers of trees for the city to purchase.4. There are two individuals, and two goods: private X and public G. The prices of both goods are equal to one. Individual i has income 12 and contributes G; towards the public good, so the total amount of the public good is G = G1+G2. The remaining money goes towards public good, so X; 12 – Gj. The utility function of individual i is G * X;. a) What is the contribution to a public good of each individual if they contribute indepedendly? What is the total amount of the public good? b) What is the efficient contribution to a public good?Two forms of market failures are ____ and ____. A. public goods ; externalities B. Pareto efficient allocations ; Kald0r-Hicks efficient allocations C. private costs ; social costs D. dead-weight loss ; Pigouvian tax
- 1. Suppose 20 people each have the demand Q = 20 − P for streetlights and 5 people have the demand Q = 18 − 2P for streetlights. The cost of building each streetlight is $10.a. Write the social marginal benefit equation: MBS = _______ - _________ Q/2. Hint: Type integers.b. The socially optimal number of street lights is ________. Hint: Type the number in two decimal places. 2. The __________ theorem states: As long as negotiation costs are negligible and affected consumers can negotiate freely with each other, the court could allocate the entitlement to either party, and an efficient allocation would result. Hint: The answer is case sensitive. PLEASE FILL OUT THE SPACESD. Consider a ten-mile expressway. During rush-hour the equilibrium traffic is 2000 cars. The average private cost of the trip is $5 at the equilibrium traffic level. The marginal social cost of the trip is $9 at the equilibrium traffic level. The efficient traffic level is 1500 cars. The average private cost of the trip is $4 at the efficient traffic level. The marginal social cost of the trip is $7 at the efficient traffic level. a. Which traffic volume has a higher average trip speed? Why? 3 b. What is the externality cost per car at the equilibrium traffic level? What is the externality cost per car at the efficient traffic level? Explain. c. What is the level of the deadweight loss on this highway when it is in equilibrium? d. What is the efficient congestion toll on this highway? e. If the average fixed cost for expanding the highway is $2, should the state expand the highway? Explain.(Negative Externalities) Suppose you wish to reduce a negative externality by imposing a tax on the activity that creates that externality. When the amount of the externality produced per unit of output increases as output increases, the correct tax can be determined by using a demand-supply diagram; show this. Assume that the marginal private cost curve slopes upward. Negative Externalities: The Market for Electricity in the Midwest: