final_Winter2008

final_Winter2008 - Econ 51 Final Exam Instructions This is...

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Econ 51: Final Exam March 17, 2008 Instructions: This is a closed book, closed-notes exam. You are allowed to use a hand-held calculator (i.e. no laptop). You have 180 minutes. Please answer all 5 questions. Please use a separate blue book for each question. Please write on each blue book the number of the question, your name, and your section number (or section time and TA). Always remember: think before you do the math . intelligently. Questions 2 and 5 are probably the most time consuming, so you may want to leave them to the end. Good luck! a. (7 points) Consider a lottery ticket that pays 100 dollars with probability 0.1 (and zero otherwise). You are risk loving. Would you buy the ticket for 5 dollars? 10? 30? 70? 90? 100? 110? For each case, just answer \yes," \no," or \hard to say without further information." No explanation is needed. b. (7 points) Your mom is risk averse. You are still risk loving. You and your mom got 10 such lottery tickets (each ticket for a di±erent lottery). Each of you has an initial where each of you holds at least 5,000 dollars. How did you split the lottery tickets? Explain. c. (3 points) In the setting above (but without restricting each of you to hold 5,000 tickets? If no, explain why. If yes, describe the allocation. 2. Externalities and Public Goods (28 points) Rob and Tom are roommates who love to surf the Internet. Each has his own private laptop, and they share a wireless router that lets them connect to the Internet for free. They gain utility only from sleeping and from playing online chess. The utility u ( c; b ) each gains is a function of how much each sleeps b and how much each plays online chess c . Quantity of 1
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chess playing c depends on the time spent on it t and on the Internet connection speed
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This note was uploaded on 03/19/2011 for the course ECON 51 taught by Professor Tendall,m during the Winter '07 term at Stanford.

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final_Winter2008 - Econ 51 Final Exam Instructions This is...

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