EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 16.3, Problem 1MQ
To determine
Whether efficiency be achieved if transaction costs were zero but property rights did not exist.
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There are a range of property rights regimes that are possible in agriculture. These range from a landowner who pays fixed wages to her farm worker and keeps all profits from working the land, all the way to a tenant who pays a fixed rental fee to the landowner and keeps all profits from working the land. Somewhere in the middle is a sharecropping arrangement where the landowner and tenant share the revenues from selling their crops (normally in equal proportion). Suppose the agricultural output of a plot of land depends on the inputs y of a landowner and the inputs x of a tenant. Output is given by Q = A[logx + logy] , where A = 10. The price received for the goods is p = 1, the cost of a unit of effort to the tenant is w = 1 and the cost to the landowner of a unit of her inputs is r = 2. Question:Suppose the landowner and the tenant share output in equal proportions. What will be the levels of x and y? What is total output?
Use the following information for questions 3-6. The columns indicate the number of trains running. Total railroad profits are the total profits to the railroad from running the specified number of trains. Total lost farmer profits are total profits the farmer loses from a specified number of trains running.
Trains
1
2
3
Total Railroad Profit
$100
$200
$300
Total Lost Profit for Farmer
$40
$130
$250
Assuming transaction costs are $0, if the Farmer and Railroad split all gains from trade evenly, would the Farmer prefer his land to be protected by a liability rule or a property rule?
A.
A liability rule
B.
A property rule
C.
The Farmer is indifferent between the two rules
D.
None of the above
Two businesses contribute to maintaining green spaces. Every year the companies 1 and 2 decide how much to contribute, where the joint contribution is x= x1 + x2 The spaces Greens are common so there is no rivalry. The market rents of each company depend on the quality of its infrastructure and green spaces. The utility function of firm 1 is:
Z1 = Z1 + ln(x1+x2)-x1
The utility function of firm 2 is:
Z2 = Z2 + 2 ln (x1+x2) - x2
Where Z1 and Z2 are constants
(a)Find the best response of firm 1 based on the contribution of firm 2, R1(X2) for all x2 [0,oo)
(b) Find the best response of firm 2 based on the contribution of firm 1, R2(X1) for all x1 [0,oo)
(c) Find the Nash equilibrium (x1, x2) and the total contribution x = x1 + x2.
(d) Is there free riding in this equilibrium? From which company? explain.
(e) Determine the total Pareto efficient input level. How does it compare to the results? found in (c)? explain
Question A
Chapter 16 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 16.2 - Prob. 1TTACh. 16.2 - Prob. 2TTACh. 16.2 - Prob. 1MQCh. 16.3 - Prob. 1MQCh. 16.3 - Prob. 2MQCh. 16.3 - Prob. 1TTACh. 16.3 - Prob. 2TTACh. 16.4 - Prob. 1MQCh. 16.4 - Prob. 2MQCh. 16.7 - Prob. 1MQ
Ch. 16.7 - Prob. 2MQCh. 16.8 - Prob. 1TTACh. 16.8 - Prob. 2TTACh. 16.8 - Prob. 1.1TTACh. 16.8 - Prob. 2.1TTACh. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - Prob. 3RQCh. 16 - Prob. 4RQCh. 16 - Prob. 5RQCh. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - Prob. 8RQCh. 16 - Prob. 9RQCh. 16 - Prob. 10RQCh. 16 - Prob. 16.1PCh. 16 - Prob. 16.2PCh. 16 - Prob. 16.3PCh. 16 - Prob. 16.4PCh. 16 - Prob. 16.5PCh. 16 - Prob. 16.6PCh. 16 - Prob. 16.7PCh. 16 - Prob. 16.8PCh. 16 - Prob. 16.9PCh. 16 - Prob. 16.10P
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