Chapter 17, GENERAL EQUILIBRIUM AND WELFARE ECONOMICS Video Solutions, Intermediate Microeconomics with Applications

Problem 1

Define and briefly explain the following.
a. Partial equilibrium.
b. General equilibrium.
c. Marginal rate of transformation.
d. Marginal rate of substitution.
e. Marginal rate of technical substitution.
f. Social welfare function.
g. $X$ efficiency versus allocative efficiency.
h. Market failure.
i. Externalities.
j. Public good.
k. Collective good.
1. The free-rider problem.

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Problem 2

Enumerate as many "marginal conditions" as you feel are necessary for Pareto equilibrium under the following circumstances: two goods $(X, Y)$, two inputs $(K, L)$, two consumers $(A, B)$, perfect competition in the input and output markets, and no other constraints.

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05:47

Problem 3

In the discussion about taxes and subsidies in Application 3, can you demonstrate why neither a tax nor a subsidy is called for in the case of a constant cost industry?

Puneet Prajapati

Numerade Educator

01:48

Problem 4

Calculate the benefit/cost ratio of owning a telephone in your home. Make appropriate assumptions about the costs and benefits.

Michael Cooper

Numerade Educator

Problem 5

Compare the economic value of adding an automatic sprinkler system to the city golf course in light of the Hicks, Scitovsky, and Kaldor welfare criteria.

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Problem 6

Cite examples demonstrating the general applicability of the Theory of the Second Best.

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01:15

Problem 7

Set up a model of an activity that also contributes significant amounts of environmental pollution. Determine the "optimal" level of permissible pollution. (Hint: You may use a marginal benefit-marginal cost model, or an EOQ model, or some model of your own.)

Jennifer Stoner

Numerade Educator

03:07

Problem 8

Analysis of accidents in a state indicates that increasing the width of the highways by 30 feet may decrease the accident rate from 800 to 290 per 100 million vehicle miles. What should be the average daily number of vehicles using the "improved" highway to justify widening on the basis of the following estimates? Average loss per accident $$\$ 3000$$; per mile cost of widening highway- $$\$ 90,000$$; useful life of improvernent-30 years; annual maintenance cost- $-5 \%$ of first cost. (Assume there is no opportunity cost of money.)

Carson Merrill

Numerade Educator

Problem 9

Suppose you have to select one of the following mutually exclusive projects, whose estimated total benefits and costs are shown.
If money has an opportunity cost of $12 \%$, which project is most economical? Which project will you select if you are interested in the maximum absolute return? If the money has no opportunity cost, which project will be the best for society?

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Problem 10

Outline the function of government and the general nature of public activities.

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Problem 11

Do a benefit-cost study of a Ph.D. degree in English literature. Include any "intangible" or "immeasureable" aspects if deemed appropriate.

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Problem 12

Will Arrow's Impossibility Theorem always hold if there are three proposals $(X, Y, Z)$ and three voters $(A, B, C)$ ?

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00:55

Problem 13

State your opinions and the alleged advantages and disadvantages of:
a. pornographic material sold publicly.
b. the consumption of alcohol.
c. nuclear energy.
d. gasoline rationing.
e. wage and price controls.
f. advertising.
g. fuel standards for automobiles.
h. currency devaluation.

Jessica Reyna

Numerade Educator