Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 36, Problem 1.2P
To determine
Identify the selection bias in the original British plan.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 60 percent chance of low demand and a 40 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P = 300,000 – 400Q and P = 500,000 – 275Q, respectively. Your cost function is C(Q) = 140,000 + 240,000Q.
How many new homes should you build, and what profits can you expect?
Number of homes you should build: homes
Profits you can expect: $
The Government of Malaca has decided to sell pollution permits that will allow people to discharge pollutants into its largest
freshwater lake. Each permit represents the right to discharge one tonne of pollutants. Malaca has determined that the lake will
tolerate a maximum of 10 tonnes of pollutants per year and has decided to sell the permits using a Dutch auction. This means that the
auction starts at a very high price, which is reduced in steps until the price reaches a level that will result in all 10 tonnes of pollution
permits being sold at the same price. The results of the bidding are shown in table below.
Price per
Pollution
Bidder
Bidder
Bidder
Bidder
Bidder
Permit
A.
B
D
$5, 500
1
5,000
4,500
4,000
1.
1.
1
2
2.
3
2
1
2
3,500
3,000
2,500
2,000
4
3
2
4
4
4
3
4
4
1,500
7
a. What will be the price of pollution permits as a result of this auction?
Price: $
b. Suppose that Bidder E happened to be an environmental protection group. If this group had not participated in the…
Need your expertise
Chapter 36 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Similar questions
- The Government of Malaca has decided to sell pollution permits that will allow people to discharge pollutants into its largest freshwater lake. Each permit represents the right to discharge one tonne of pollutants. Malaca has determined that the lake will tolerate a maximum of 40 tonnes of pollutants per year and has decided to sell the permits using a Dutch auction. This means that the auction starts at a very high price, which is reduced in steps until the price reaches a level that will result in all 40 tonnes of pollution permits being sold at the same price. The results of the bidding are shown in table below. Price per PollutionPermit BidderA BidderB BidderC BidderD BidderE $5,500 2 5,000 4 6 4,500 6 6 1 1 1 4,000 8 7 2 2 2 3,500 10 7 4 3 3 3,000 12 9 6 3 4 2,500 14 10 8 3 5 2,000 16 11 9 4 6 1,500 18 12 10 4 7 a. What will be the price of pollution permits as a result of this auction? Price: $ b. Suppose that Bidder E happened to be an…arrow_forwardYour firm operates in a market of 200,000 people. By your estimates, you need an install base (people that are willing to use your product after trial) of approximately 40,000 people. Historically, you know that 40% of the people that try your product become regular users. After speaking with some advertising executives, they explain that it takes roughly 10 advertisements on local television stations to get 60% of the viewers to try a product they see on television in this market. These same executives have quoted a Cost Per Point (CPP) of $100, where they define a Gross Rating Point as 1% of the population seeing 1 advertisement. 4a) How much will it cost to achieve your objective?arrow_forwardIn 'the dictator' game, one player (the dictator) chooses how to divide a pot of $10 between herself and another player (the recipient). The recipient does not have an opportunity to reject the proposed distribution. As such, if the dictator only cares about how much money she makes, she should keep all $10 for herself and give the recipient nothing. However, when economists conduct experiments with the dictator game, they find that dictators often offer strictly positive amounts to the recipients. Are dictators behaving irrationally in these experiments? Whether you think they are or not, your response should try to provide an explanation for the behavior.arrow_forward
- In this version of the ultimatum game experiment, one participant is given £100, and is told to offer to split that amount with another participant. The second player can either refuse to accept the division, in which case the participant receiving the £100 has to give it back, or can accept the division, in which case, the player receiving the money splits the £100 as proposed. For the participant who has to accept or reject the offer A) The best strategy is to accept any offer which meets the social norm for fairness. B) The best strategy is to threaten to turn down any transfer of less than £100 to ensure that the person receiving the money makes a fair offer. C) There is a dominant strategy to accept any offer because gaining some money is better than gaining no money D) There is a dominant strategy to turn down any offer other than £50 because an unequal split would be unfair.arrow_forwardBurger King has introduced new strategy by reducing the price of its Whopper by 75 percent if customers also purchased french fries and a soft drink. Nevertheless, the sales dropped within two weeks. Based on your knowledge on game theory, what do you think had happened? The Edge magazine columnist, Jack Sparrow reported the recent findings of two academic political scientists. These scholars found out that voters are not happy with “negative campaigns” of politicians. However, the political scientists suggested it is pointless for candidates to stay positive. The damage from staying positive is heaviest when the opponent is attacking. Explain the dilemma. Airlines practice price discrimination by charging leisure travelers and business travelers different prices. Why do you think by charging different prices; the airline companies will maximize their profits? Discuss briefly.arrow_forwardQuestion 5 Consider an ultimatum game in which a Proposer offers a two-way split of $100 to two respondents. If either of the Responders accepts but not the other, that Responder and the Proposer get the split and the other Responder gets nothing. If no one accepts, no one gets anything, including the Proposer. If both Responders accept, one is chosen at random to receive the split. The following figure shows some laboratory evidence of this ultimatum game, with the proportion offered to the Responder on the horizontal axis. Based on this information, which of the following statements is correct? 100% One Responder 70% Two Responders 50% 10% 20% 10% ON ON SN 10% ASN 20% as 40 45s sos Fraction of offers rejectedarrow_forward
- There are two students, each of whom can choose to plant flowers (F) or not to plant flowers (N). If both students plant flowers, then the (flower appreciation) benefit is 120 to each player. If exactly one student plants flowers, then the benefit is 65 to each player. The cost to either player of planting flowers is c > 0, regardless of the other player's choice. Each student starts (before any costs or benefits) with a payoff of zero. The above assumptions lead to the following game in strategic form. F N 120 – c, 120 – c 65 — с, 65 65, 65 — с 0,0 Suppose thatc< 120. This game is a prisoners' dilemma if and only if the parameter c is strictly greater than which value?arrow_forwardAs the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 60 percent chance of low demand and a 40 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P = 400,000-400Q and P=900,000-2500, respectively. Your cost function is C(Q)=125,000+ 430,0000. How many new homes should you build, and what profits can you expect? Number of homes you should build: homesarrow_forwardP-TV and QRS-TV are planning their fall line-up. Suppose that sit-coms are more popular than reality shows, and so generate more advertising revenue than do reality shows, but they are more expensive to produce since real actors must be hired. In the following decision tree, QRS-TV announces its decision first and P-TV observes that choice before it decides whether to air a sit- com in the same time slot or a reality show. Both stations know all of the information shown in this diagram when they make their decisions. QRS-TV Sit-com Reality P-TV- P-TV Sit-com Reality Sit-com -QRS-TV eams -$5 million; P-TV earns -$5 million QRS-TV earns +$5 million; P-TV eams +$20 million Reality QRS-TV earns +$20 million, P-TV earns +$5 million QRS-TV earns +$10 million; P-TV cams +$10 million Given the information in this decision tree, this season programming in this time slot on QRS-TV and P-TV will be: Select one: O a. a sit-com on QRS-TV and a reality show on P-TV. O b. only sit-coms. O c. only…arrow_forward
- Next Friday, you plan to sell cakes at a bake sale to raise money for your school. You plan to charge $30 per cake, and you anticipate that you will sell 10 cakes. You can either purchase cakes to sell or bake them yourself. If you purchase the cakes, they will cost $11 each. If you bake your own cakes, your cost depends upon the number of cakes you bake, as shown in the table below.Number of cakes you bake Total cost of baked cakes ($)0 01 102 223 364 525 706 907 1128 1369 16210 190 a. How many cakes should you bake? How many cakes should you purchase?Instructions: Enter your answer as a whole number.Bake ___ cake(s) and purchase ___ cake(s).b. Given your answer to part a, how much in total will the 10 cakes cost you?Instructions: Enter your answer as a whole number. Note:- Don't use pen or paper and chatgptarrow_forwardAs the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 70 percent chance of low demand and a 30 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P = 300,000 -450Q and P = 700,000 -325Q, respectively. Your cost function is C(Q) = 135,000 + 172,500Q. How many new homes should you build, and what profits can you expect?arrow_forwardWhen a famous painting becomes available for sale, it is often known which museum or collector will be the likely winner. Yet, the auctioneer actively woos representatives of other museums that have no chance of winning to attend anyway. Suppose a piece of art has recently become available for sale and will be auctioned off to the highest bidder, with the winner paying an amount equal to the second highest bid. Assume that most collectors know that Yakov places a value of $35,000 on the art piece and that he values this art piece more than any other collector. Suppose that if no one else shows up, Yakov simply bids $35,0002=$17,500 $35,000 2 = $17,500 and wins the piece of art. The expected price paid by Yakov, with no other bidders present, is. Suppose the owner of the artwork manages to recruit another bidder, Bob, to the auction. Bob is known to value the art piece at $28,000. The expected price paid by Yakov, given the presence of the second bidder Bob, is.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
