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# FinalExam08 - Lyon Econ 7140 Final Exam 1 Let there be 2...

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Lyon Econ 7140 April 29, 2008 Final Exam 1. Let there be 2 private goods, 2 inputs, 2 strictly concave production functions, fixed endowments of the inputs, no "externalities," and price-taker individuals and firms. Show (prove) that the market equilibrium will be Pareto optimal. 2. Let there be two public beaches on the ocean by a large city. Beach A is a small beach, but is very close to the city, while Beach B is a large beach about 10 miles (15 kilometers) from the city. We will assume that the transportation cost of going to Beach A is \$.5, and for Beach B is \$2. Both beaches are open access beaches, which means that there is no fee for using them. All people have to do is show up at the beach and they can use it. No one will be excluded from using either beach. We will assume that for Beach A the effects of congestion upon demand for beach use can be summarized in a congestion cost function. Also we assume that the beaches are perfect substitutes except for location and congestion;

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FinalExam08 - Lyon Econ 7140 Final Exam 1 Let there be 2...

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