Discussion section problem set 7 econ 200

Discussion section problem set 7 econ 200 - files...

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Problem Set 7 Economics 200 We will review these problems in discussion sections beginning Wednesday, December 2. 1. A three-person city is considering a fireworks display. Bertha is willing to pay $100 to see the fireworks, Marian is willing to pay $30, and Sam is willing to pay $30. The cost of the fireworks is $120. (a) In terms of efficiency, should the fireworks display be offered? (b) Will any single citizen provide the display on his or her own? (c) Suppose the town decides to put the matter to a vote. If at least two people vote in favor of the fireworks display, each person will be taxed $40 and the fireworks display will be held. How many people will vote in favor of the display? 2. All University of Maryland students have free access to the Internet. The private and social value of downloading a file is $17. (a) When many people use the Internet at the same time the time to download
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Unformatted text preview: files increases. Explain why this implies that the Internet is a common resource. (b) Five Maryland students are interested in downloading a file using the Internet. Suppose that the total cost (including the value of time) of their using the Internet is as follows: Number of Internet Users Total Cost Average Cost Marginal Social Cost----1 10 2 20 3 36 4 60 5 90 Complete the average cost and marginal social cost columns of the table above. (c) How many people would you expect to use the Internet? What is the efficient number of users? (d) Suppose three people are using the Internet. Calculate the total damages the third user imposes on the two users who are already on the Internet. (e) Show that the University could reach the efficient outcome by charging people a $4 fee to download a file. 3. Do Problem 11 on page 411 in the ninth edition of the Parkin text....
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This note was uploaded on 04/03/2010 for the course ECON 2407 taught by Professor H.terrell during the Fall '09 term at Maryland.

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