Felix and Oscar are roommates. Oscar is messy,and Felix is planning to move out unless they cancome to an agreement. For the roommates to reacha private solution, does it matter whether Oscarcompensates Felix for being messy or Felix paysOscar to clean up?

Felix and Oscar are roommates. Oscar is messy,and Felix is planning to move out unless they cancome to an agreement. For the roommates to reacha private solution, does it matter whether Oscarcompensates Felix for being messy or Felix paysOscar to clean up?

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Frontiers Of Microeconomics

Section: Chapter Questions

Problem 6PA

See similar textbooks

Similar questions

you and a friend decide to run a three mile race. If you agree to run together, you keep up with himfor the first mile, but you overexert yourself and run the last two miles at slower paces on your own. Tomake up for lost time, your friend runs the last two miles at a faster pace. Your mile times are 6:30, 7:00,and 7:30. Your friend’s times are 6:30, 6:00, and 6:00. If you both agree to run on your own, you run aconstant pace of 7:05 while your friend runs at a constant pace of 6:05. If you want to run together butyour friend wants to run solo, he runs his constant pace of 6:05. You, on the other hand, want to showhim that you can run faster, but you end up overexerting yourself after the first mile. You run times of6:20, 7:05, and 7:30. If he wants to run together but you do not, you both run at your pace of 7:05. Thissituation can be turned into an economic game, with the payoffs the overall race times. You each wantto run the fastest time you possibly can.(a) Who are the players in…
There are a kicker and a goalie who confront each other in a penalty kick that willdetermine the outcome of the game. The kicker can kick the ball left or right, while the goaliecan choose to jump left or right. Because of the speed of the kick, the decisions need to bemade simultaneously. If the goalie jumps in the same direction as the kick, then the goalie winsand the kicker loses. If the goalie jumps in the opposite direction of the kick then the kickerwins and the goalie loses. Model this as a strategic form game and write down the matrix thatrepresents the game you modeled. Find the Nash equilibrium.
cap-and-trade and windfall profitsA city called Seoul is suffering from high concentrations of mercury in the air, caused by burningcoal in power plants. There are two of these plants close to the city. The city’s mayor wants touse cap-and-trade to reduce emissions to a reportedly “safe” level of 60 tons. The two firms havethe following marginal benefits of emissions: MB1 = 100 – 2e1, MB2 = 25 – 0.5e2.a. How much mercury will each firm emit? What allowance price will prevail in themarket?Firm 2 hires a smart lobbyist who convinces the government that its profits are relatively low andthat it therefore deserves a generous allowance allocation. The government agrees and allocatesa1 = 20 allowances to firm 1 (for free) and a2 = 40 allowances to firm 2 (for free).b. What are the firms’ profits? Do any of the firms earn windfall profits? [Hint: compareprofits with and without regulation.] Windfall profits have been sharply criticized by consumer advocacy groups and politicians.c. What can…
1) Bargaining Adam has a car in good condition that he uses daily and that he values at 4000$. Blair values the same car at 4300$. Blair has 5000$ to spend. Adam has received an offer for 3500$ from a third party. a) What are the threat points for Adam and Blair? What is the surplus they could get from cooperating? What is the range of prices for the sale of the car that can support that cooperative outcome? b) Now suppose that the offer from the third party is 4200$. What are the new threat points? What is the new surplus of cooperation between Adam and Blair? c) Finally, suppose that the seller of a car has to pay a tax of 200$ and the buyer of a car has to pay registration fee of 150$. There is no offer from a third party. What are the threat points? What is the new surplus from cooperation? What is the range of prices that supports cooperation?
Chemical Firm 1 Ton Pollution Pollution Shut 2 Tons 15 20 Down 01 15 20 Operate 25 10 2. The above figure shows the payoff matrix for two firms. A chemical firm must choose between a low level of production which yields one ton of pollution into a nearby lake and a high level of production which yields two tons of pollution into the nearby lake. A private beach on the lake must decide whether to operate or not. Increased pollution reduces the number of people who wish to visit the beach. a) Determine the Nash equilibrium without property rights. b) If the chemical firm owns the lake and the beach owner must pay the chemical firm $10 to produce only one ton of pollution, what is the outcome? c) If the beach owner owns the lake and the chemical firm must pay $10 per ton of pollution, what is the outcome? d) Compare results of part a, b, and c. Beach
Why is information asymmetry not a problem if both parties to an agreementwant the same thing?
Consider the following public good provision game. There are 3 players with private infor- mation about their costs of contributing for the public good. Players have two actions: contribute or don't contribute. If at least two players contribute for the public good, then they all get a payoff of 1. If less than two players contribute, then all receive zero payoff. Only the players who contribute for the public good pays the cost. The costs are either a or 0.8 and each is equally likely. (a) Find the highest value of r in a Bayesian Nash equilibrium where all players with type r contributes and all players with type 0.8 don't. (b) Now suppose that costs are either 0.2, 0.5 or 0.8 and all three are equally likely. Find a Bayesian Nash equilibrium in which players with type 0.2 always provide, players with type 0.8 never provide and players with type 0.5 uses a mixed strategy in which they provide with probability p > 0. Find the value of p.
Noise is not a problem at which stage of communication process?
2. Suppose your neighbor likes to host parties at their house. They value having these parties at $200. These parties, however, impose a cost on you due to the noise they make. a. If your disutility is $100 from the noise being made, and you have the right to it being quiet, is there a solution that you and your neighbor can agree on? If so, what is it? b. If your disutility is $250 from the noise being made, and you have the right to no noise being made, is there a solution that both of you could agree on? If so, what is it? If not, what can change in terms of property rights to make an agreement possible?
Consider a factory, located in the middle of nowhere, producing a nasty smell. As long as no one is around toexperience the unpleasant odor, are any externalities produced? Suppose that there was family next door to the smelly factory. Do we now have an externalities problem?Suppose that the family clearly possesses the right to a pleasant-smelling environment. Does this mean thatthe factory will be required to stop producing the bad smell? What can be a private solution to this problem?
A6. 1.Adam and Zoey are competing fish and chips sellers in Linear City. They are located at the twoopposing ends of the town’s 3-mile-long Main Street. The 1700 inhabitants of the town are distributeduniformly on Main Street and each of them eats at most one portion of fish and chips for lunch. People’sdisutility from getting to a fish and chips stand and back home amounts to $2 for each mile of distanceto the stand. The marginal cost of producing one portion of fish and chips is $9. The consumers areuniformly distributed along the street. Each consumer has a valuation of $29.0 for the product. Supposethat both Zoey and Adam can advertise at zero cost to inform everyone about their business. Find theequilibrium price of Zoey if neither of the two sellers advertises.
Consider a small town with only three families, the Greene family, the Brown family, and the Black family. The town does not currently have any streetlights so it is very dark at night. The three families are considering putting in streetlights on Main Street and are trying to determine how many lights to install. The table below shows each family’s willingness to pay for each streetlight. Number ofStreetlights The Greene Family The Brown Family The Black Family 1 $340 $480 $420 2 260 380 400 3 160 260 340 4 40 130 240 5 0 50 100 6 0 0 20 Refer to Table 11-2. Suppose the cost to install each streetlight is $360 and the families have agreed to split the cost of installing the streetlights equally. If the residents choose to install the number of streetlights that will maximize total surplus from the streetlights, how much total surplus will the Greene family receive? a. -$80 b. $360 c. $320…