Answer the question on the basis of the following information for a public good. Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it. These people are the only two members of society.Suppose government has already produced 4 units of this public good. The amount individual B is willing voluntarily to pay for the fourth unit is
What will be an ideal response?
2?
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In the short run, why does a production function eventually display diminishing returns to labor?
A) As a firm hires more workers the skills and the work ethic of the additional workers will eventually decline. B) The opportunity cost of hiring additional workers must eventually rise. C) As the number of workers increases eventually the gains from the division of labor and specialization are used up. D) As the number of workers increases it becomes difficult to monitor them.
Collusion makes firms better off because if they act as a single entity (a cartel) they can reduce output and increase their prices and profits. But some cartels have failed and others are unstable
Which of the following is a reason why cartels often break down? A) Most cartels do not have a dominant strategy. B) Each member of a cartel has an incentive to "cheat" on the collusive agreement by producing more than its share when everyone else sticks with the collusive agreement. C) Members of a cartel may resent having to share their profits equally. D) When a cartel is profitable the amount of competition it faces increases.
Consider a market with inverse demand p = 100 – 2Q. Firms have no fixed cost and constant marginal cost c
a. Derive the firms' outputs and profits when this market is served by Cournot duopolists. b. How do outputs and profits vary with c? Specifically, use calculus to find the derivative of the output of each firm and profit of each firm with respect to c. c. Suppose the firm's also have a fixed cost of F in addition to the marginal cost c. How does F alter the best response functions and NE? Explain in words. (For technical reasons, assume that both firms still produce a positive level of output in equilibrium)
The gains from trade within a price system is
A) the sum of consumer surplus and producer surplus. B) consumer surplus less producer surplus. C) consumer surplus divided by producer surplus. D) consumer surplus multiplied by producer surplus.