Three roommates, Alan, Billy and Casey, are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Table below indicates their willingness to pay for each movie:   1st movie   2nd movie   3rd movie   4th movie   5th movie   Alan   $20     $10     $0   $0     $0     Billy   $30     $20   $10   $0   $0   Casey   $50    $40    $30   $20   $10   Explain why some people believe that the showing of a movie within the dorm room is a public good.

Markets and Common Resources.  This problem is also called “the tragedy of the commons.” There are seven families in the village.  Each family has $70 to spend on either a steer or a bond.   A steer today costs $70 per steer; a bond costs $70.   In one year, a family can sell their steer that uses the common grazing land (the common resource) for the village.   The revenue and price received for selling a steer depend upon how many other families are selling their steers.  See the demand for steers in the graph below.   A family can buy one steer or buy one bond.  Therefore, the number of steers is the number of families that decided to buy a steer. If a family holds the $70 in cash, the family will earn nothing.   Each family has $70.   If a family buys a bond today for $70, they will receive $90 in one year.    A family can only earn income from raising & selling steers or from buying and holding bonds. Hint: complete the table first.     How many families will want to buy a…

Suppose that the St Clair river, which flows along the border between Ontario and Michigan, becomes polluted and needs to be cleaned. The American and Canadian governments need to make a decision on whether to clean the river or not. They must make this decision simultaneously. If both countries invest in cleaning the river, they each get a payoff of 871. If one country invests in cleaning the river, but the other one doesn't, the country that spends the money on the cleanup gets a payoff of 161, while the other country gets to enjoy the benefits of the clean river without having to spend any money, and therefore gets a payoff of 1159. If neither country invests in cleaning the river, they must both deal with the consequences of the pollution, and they each get a payoff of -639. Suppose that the U.S. and Canada are again making decisions simultaneously. Find the Nash Equilibrium in mixed strategies. In the mixed strategy Nash Equilibrium, what is the probability that Canada invests in…

Scenario 10-1 The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000th gallon of gasoline entails the following: a private cost of $3.10 • a social cost of $3-55 a value to consumers of $3.70 Refer to Scenario 10-1. Suppose the equilibrium quantity of gasoline is 1,150 gallons; that is, QMARKET = 1,150. Then the equilibrium price of a gallon could be a. $3.30. b. $3.80. c. $3.00. d. $2.80.