discussionqst4 - or less cars per unit time use the road...

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Discussion questions for March 23: 1. Discuss the paradox of voting using the following: Individual 1: cPb, bPa Individual 2: bPa, aPc Individual 3: aPc, cPb 2. Explain what a "Social Welfare Function" is. 3. An acceptable Social Welfare Function must satisfy certain postulates. a. Why is this important? b. State and explain the 5 postulates used by Vickrey. 4. Define a "decisive set." 5. Present and explain Vickrey's proof of Arrow's Theorem. Discussion questions for March 30: 1. Let there be two neighbors, A and B, and let both desire to build a fence between the two homes. The fence if it is over 5 feet tall will block A's view of the mountains; hence, A's utility will increase with fence height up to 5 feet but will decrease with increases in the height of the fence over 5 feet. B's utility, however, is posited to increase with height of the fence up to 10 feet. Is it possible that a Pareto efficient height of the fence will be built. Explain why of why not. 2. Let there be two cities connected by two roads. Road A is smooth and narrow, so that when 10
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Unformatted text preview: or less cars per unit time use the road there is no congestion, yielding a 30 minute travel time between the cities. In addition, each additional car after number 10 adds 2 minutes to everyone's travel time. Road B is wide and bumpy; hence congestion at any relevant use is uncongested, but the travel time between he cities on this road is 40 minutes. a. Give Silberberg's definition of "common property." b. If the two roads are "common property" and 50 cars per unit time use the two roads, how many will be on each road? (We will ignore all costs differences other than time costs. That is, we ignore the possibility that the bumpy road adds to maintenance costs.) c. Will this be a Pareto-optimal solution? Explain. d. Now let Road A be privately owned, and let the owner charge a toll. If time is worth $ 0.5 per minute, what toll will the owner charge? Will this yield a Pareto-optimal solution? Explain....
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This note was uploaded on 01/09/2011 for the course ECON 7140 taught by Professor Kutler during the Spring '10 term at Utah Valley University.

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