HW2a-CH7&8_Xtns - Chapters 7 & 8 Homework #2.a...

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Chapter 7: 1. In Right-to-Work states, the law allows people to opt-out of joining a labor union and thus paying membership dues while still being covered by the collective bargaining agreement negotiated by the union. Suppose that a union leader says that a public good will be underprovided in Right-to-Work states. What public good is the union leader referring to, and what problem might cause it to be underprovided? 2. Roads are typically viewed as a public good. However, some highways are financed by tolls levied on drivers instead of through taxes. Discuss why this model works for some roads and not others in terms of the properties of public goods. 3. Suppose that two individuals, Jon and David, form a community and would like to construct a communal fort that would protect them from attacks. They consume both good X , a private good, and the protection from the fort, P . One unit of good X costs 1 unit while one unit of P costs 2 units. Both Jon and David have an income of 100 and a utility function of the form: U = log( X i ) + 2*log( P J + P D ) The budget constraint for each is given by: X i + 2* P i = 100 a. Find the amount of protection Jon will provide as a function of how much David provides, and explain why the relationship is the way it is. b.
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This note was uploaded on 08/23/2011 for the course ECON 4504 taught by Professor Robertpennington during the Spring '11 term at University of Central Florida.

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HW2a-CH7&8_Xtns - Chapters 7 & 8 Homework #2.a...

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