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EC302_Worksheet_4_S1_2012 - EC302 MICROECONOMIC ANALYSIS...

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EC302: MICROECONOMIC ANALYSIS SEMESTER 1 2012 Worksheet 4 1. Three voters A, B and C will decide by majority rule whether to pass bills on issues X and Y. Each of the two issues will be voted on separately. The change in net benefits (in $) that would result from passage of each bill is as follows: Voter X Y A +6 -3 B -1 +4 C -2 -3 a. Which issues (if any) would pass if decided by majority vote? Is this the efficient outcome? b. Which issues (if any) would pass if logrolling were allowed? Would logrolling improve efficiency? Would it result in efficient outcome? c. Suppose that it were legal for one voter to pay another to vote a certain way. Would allowing such side payments improve efficiency from part (b)? Would it result in efficient outcome? d. What amount of side payments would take place if paying for votes were allowed? (RG Page 134 Question No 3) 2. Assume that the demand curve for milk is given by Q = 100-10P, where P is the price of milk per liter and Q is the number of liters demanded per year. The supply curve is horizontal at a price of $2.
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