Allocative efficiency occurs where (for the last unit) maximum willingness to pay exceeds minimum acceptable price by the greatest amount. True or False True False
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- A seller sells a good of quality q at a price t. The cost of producing at quality level q is given by q2/2. There is a buyer who receives a utility of Xq − t by consuming the unit of quality q at price t. If he decides not to buy, he gets a utility of zero. X can take two values X1 = 1 and X2 = 4. (a) Suppose the seller can observe X. Derive the profit maximizing price-quality pairs offered when the type is X1 = 1 and when the type is X2 = 4. (b) Show that the full information price-quality pairs are not incentive compatible if the seller cannot observe X.Joe's search costs are $5 per search. He wants to buy a smart watch for his wife for Christmas, and the lowest price he's found so far is $300. Joe thinks 80 percent of the stores charge $300 for smart watches and 20 percent charge $200. Joe's optimal decision is to Multiple Choice continue to search for a lower price since the expected benefit of an additional search is $20, which exceeds his per-unit search costs. continue to search for a lower price since the expected benefit of an additional search is $80, which exceeds his per-unit search costs. stop searching and purchase a video player for $300. continue to search for a lower price since the expected benefit of an additional search is $100, which exceeds his per-unit search costs.Three decision makers have assessed utilities for the following decision problem (payoffin dollars): The indifference probabilities are as follows: a. Plot the utility function for money for each decision maker.
- We have 72 free units to distribute among 100 agents. Their willingness to pay is p: The function d(p) = 100 p gives us the number of agents willing to pay p or more. Find the CEEI solution.Let the qualities (q) market be distributed uniformly in the interval [0;100]. The buyer's maximum estimate value is a function of V=1.5*q. The minimum selling price is a function of C=5+q/2. Find tradable in Pareto quality and equilibrium make a graphUse economic reasoning as to why the market would fail to yield the efficient outcome of price gouging of face mask
- [Adverse Selection] Two firms, Gord and FM, sell cars. Suppose 50% of thenew cars in the market are made by Gord and 50% are made by FM. Gord has superiortechnology so it produces higher quality cars, and the cost of producing a car is $90 for Gord.FM produces low quality cars at a unit cost of $50. Consumers value high quality cars at $120and low quality cars at $80. Suppose consumers are willing to pay any price at or below theirvalues. Sellers can either accept or reject offers depending on whether an offered price isabove or below the car’s cost.a. Assume there is imperfect information such that consumers know one companyproduces high quality cars and the other produces low quality cars, but they do notknow which company produces high quality cars. What is the equilibrium price of cars?b. How does your answer in part (a) change when the cost of producing a car forGord is $105 (instead of $90)?c. Back to the setting in part (a). Suppose we have the following dynamicgame. First, each…There are five students who are looking to buy one second-hand textbook each. Their willingness-to-pay are $5, $6, $8, $12, and $15, respectively. Based on this information, which of the following statements is correct? Select one: a. If a seller is one of many identical sellers and his reservation price is $8, then he is guaranteed to sell his textbook. b. To sell three books, the maximum price that can be charged is $8. c. The student with a willingness-to-pay of $15 is the richest. d. Their willingness-to-pay indicates an upward-sloping demand curve.Ali Receives Utility From (D)omestic Vaccines from Kayseri, and the Sinovac Vaccine-(F)oreign. The utility structure is U(D,F)=D x F. The price of the foreign vaccine because of increasing returns to scale is $200, whereas at its earlier stages, the domestic vaccine is produced at a higher cost, and higher price of $250. The government has given each and every citizen a fixed payment of $8000 to spend just on vaccines, but it has not specified which vaccines. a- Does Ali Solve the Utility Maximization Question in an interior equilibrium or a corner solution? How do you know? What condition does the interior equilibrium necessitate regardless. b- Find Ali's Utility Maximizing Level of Domestic and Foreign Vaccines when he uses just the government allowance on vaccines? What is his utility level? C- Suppose the government wants to decrease Turkey's health exports. It pushes a vaccine subsidy, just for domestic vaccines that makes the price of domestic equal to $160. How does the utility…
- Consider a market for used computer printers, where buyers value good ones at $1,000 and bad ones at $760. Sellers value good ones at $910 and bad printers at $690. Sellers can attach a warranty at cost of $20 per month for good ones and $45 for bad ones. What is the minimum number of month necessary in order for the seller of good printers to be able to signal her type? Group of answer choices 5 6 9 11True or False. An analysis of the general equilibrium effects of a voucher program accounts for spillovers..You have just been hired as manager of a new health spa in RetirementVillage, Florida. The owner has commissioned a market study that estimates the average customer’s monthly demand curve for visiting the healthspa to be Q = 50 − 0.25P. The cost of operating is T C = 3Q, whereQ is the number of visits. The owner has been charging a $20 per-monthmembership fee and a $5 per-visit fee. Part of your salary is 10 percent ofthe monthly profits. Suggest a pricing strategy that will increase your salary