Four roommates are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Here is their willingness to pay for each film. 　 DongJu Dinh SangMin HyungSeok First film $7 $5 $3 $2 Second film 6 4 2 1 Third film 5 3 1 0 Fourth film 4 2 0 0 Fifth film 3 1 0 0 1) Within the dorm room, is the showing of a movie a public good? Why or why not? 2) If it costs $8 to rent a movie, how many movies should the roommates rent to maximize total surplus? 3) If they choose the optimal number from part 2) and then split the cost of renting the movies equally, how much surplus does each person obtain from watching the movies? 4) Is there any way to split the cost to ensure that everyone benefits? What practical problems does this solution raise? 5) Suppose they agree in advance to choose the efficient number and to split the cost of the movies equally. When DongJu is asked his willingness to pay, will he have an incentive to tell the truth? If so, why? If not, what will he be tempted to say? 6) What does this example teach you about the optimal provision of public goods?

4. Four roommates are planning to spend the weekend in their dorm suite watching old olent atsomos movies, and they are debating how many to watch. The table below contains their willingness to pay for each film. John Paul George $7 $5 $3 $6 $4 $2 $5 $3 $1 $4 $2 $0 $3 $1 $0 a. Within the dorm room, is the showing of a movie a public good? Why or why not? 1st film 2nd film 3rd film 4th film 5th film C. 2102 gulden et 150 yebesnbew sho 12bo 2099712 vdio (9) b. If it costs $8 to rent a movie, how many movies should the roommates rent in order to maximize total surplus? obivo hasb fl qasihe: Ox Ringo og $2 $1 $0 $0 $0 25807) 1610A (b If they chose this optimal number of movies and split the cost evenly, how much surplus does each person receive from renting these movies? d. Is there any way to split the cost so that everyone benefits? What problems arise with this plan? e. Suppose they agree in advance to choose the efficient number of movies and split the cost based on willingness to pay.…

Four roommates are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Here is their willingness to pay for each film: First film Second film Third film Fourth film Fifth film Hubert 10 9 8 7 6 Willingness to Pay (Dollars) Manuel 9 7 5 3 1 Shen 6 4 2 0 0 This means that each roommate will pay Antonio 3 2 1 Within the dorm room, the showing of a movie is a public good. 0 0 If it costs $8 to rent a movie, the roommates should rent $4 Suppose the roommates choose to rent the optimal number of movies you just indicated and then split the cost of renting equally. 2 movies in order to maximize the total surplus.

1. When a production externality has a beneficial effect on a bystander at the market equilibrium a. the market will be efficient b. the social cost of production is less than the private cost c. society is unlikely to benefit from production subsidies d. the private benefit from consumption is less than the social cost of production   2. In the short term, we would expect home construction to have a: a. High elasticity of demand b. Low elasticity of demand c. Low elasticity of supply d. High elasticity of supply   3. Which of the following would be associated with monetary policy operations in response to an economic downturn: a. A shift of the money demand curve to the right. b. A shift of the money supply curve to the right. c. A shift of the money demand curve to the left. d. A shift of the money supply curve to the left.   4. If the government cuts government spending, then over time the government budget deficit: a. will definitely rise b. will definitely fall c. may fall, or…

Specialized electronic batteries, such as those for laptops, are hard to dispose of safely, yielding excess pollution when one gets thrown away. Suppose that producing these batteries creates a social cost of $150 per unit. Please shift the appropriate curve(s) to reflect this social cost. 1000 900 800 700 600 S 8500 400 300 200 100 0 Private Cost Which of the following is the label of the curve that shifted? Supply private Demand 1000 2000 3000 4000 5000 6000 7000 8000 Quantity of Laptops Supply social Demand private Demand social

2 The market for education confers positive externalities on society. Which of the following is an example of a positive externality that it provides? Higher quality of public institutions like government and law Subsidies for providing education Higher salary for the person earning a degree More colleges and universities X OOOO W F2 3 16 80 F3 E 888 FA R DE F % V T MacBook Air 6 Y B & 7 H tv NA 2 N 8 K M 0 W Aa zoom 0

Suppose electricity generates a negative externality in production If​ so, then   A. the marginal social cost of electricity is less than the marginal private cost .   B. the marginal social cost of electricity equals the marginal private cost .   C. the marginal social benefit of electricity is less than the marginal private benefit .   D. the marginal social cost of electricity equals the marginal social benefit.   E. the marginal social cost of electricity is greater than the marginal private cost.

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Refer to Figure. The graph represents a market in which 24 22 22 Price 18 16 81 Social cost (private cost and external cost) Supply (private cost) Demand (private valne) 120 160 Quantity a. Othere is no externality. b. Othere is a positive externality. c. Othere is a negative externality. d. The answer cannot be determined from inspection of the graph.

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