Microeconomics
2nd Edition
ISBN: 9780073375854
Author: B. Douglas Bernheim, Michael Whinston
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 1, Problem 7DQ
To determine
Identify the natural experiment.
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Suppose that Timmy lives in a neighborhood where graffiti is common. People's cars and the sides of houses are often
vandalized with graffiti
In response to the vandalism, the people in the neighborhood have proposed a voluntary community fund to pay for extra
police patrols. There are 1000 people in Timmy's neighborhood, and each is recommended to contribute $10 a month
Timmy's car has recently been vandalized and he is concerned it may happen again. Although he believes that he will benefit
from the extra police patrols, Timmy has decided to take a free-rider approach
Given his thinking, how much will Timmy contribute to the fund?
Timmy's contribution: $
Assume that the entire neighborhood has the same mentality as Timmy. What will occur?
The rate of graffiti in the neighborhood will increase significantly
Everyone will contribute money towards the community fund, yielding higher rates of police patrol and less graffiti
No one will contribute to the community fund, resulting in no…
16.12. Two consumers, Ron and David, together own 1,000 baseball cards and 5,000
Pokémon cards. Let xR denote the quantity of baseball cards owned by Ron and yR denote
the quantity of Pokémon cards owned by Ron. Similarly, let xD denote the quantity of
baseball cards owned by David and yD denote the quantity of Pokémon cards owned by
David. Suppose, further, that for Ron, MRSRxy = yR/xXR, while for David, MRSPxy = yD/2xD.
Finally, suppose xR = 800, yR = 800, xD = 200, and yD = 4,200.
a) Draw an Edgeworth box that shows the set of feasible allocations in this simple
economy.
b) Show that the current allocation of cards is not economically efficient.
c) Identify a trade of cards between David and Ron that makes both better off. (Note:
There are many possible answers to this problem.)
Suppose that you have data at the individual level that includes information on the price of a doctor
visit an individual and the number of doctor visits they go to in a given year. For simplicity, let's say
that those with more generous plans pay less for a doctor's visit, while those with less generous
plans pay more for a visit. You graph the relationship between the price individual pays for doctor
visits against the number of visits, and you see a downward sloping line; let's call this "measured
demand."
The problem of "endogeneity" discussed this week could arise here if individuals who know they go
to the doctor frequently buy_ generous coverage while those who know they rarely go to the
generous coverage. This would imply that the "measured" demand curve is
doctor purchase.
more elastic than the "true" demand curve.
more; less
more; more
less; less
less; more
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